GSK (LSE:GSK) shares ended 2024 on a sour note after what proved to be a rollercoaster year.
The pharma giant dropped 7% over the 12 months, as worries over Zantac litigation and potential shake-ups in US healthcare policy shook investor confidence.
Yet the underlying health of the FTSE 100 firm has remained steadfast, as illustrated by impressive full-year results released today (5 February).
GSK’s share price has spiked 5% following the news. Can it keep going?
Forecasts beaten
Helped by what it described as “accelerating momentum in Specialty Medicines“, full-year revenues at GSK rose 7% at constant currencies to £31.4bn. This beat broker consensus estimates by around £300m.
Turnover was up 4% at actual exchange rates.
GSK said that “continued growth across disease areas” pushed Specialty Medicine sales 19% higher at stable currencies, to £11.8bn. Oncology was the standout here, with revenues almost doubling year on year on the same basis (up 98%).
Strength here more than offset a 4% sales decline at the firm’s Vaccines division. Turnover dropped as stricter age rules in the US for respiratory syncytial virus (RSV) treatment caused Arexvy sales to plummet 51%.
At group level, GSK’s operating profit dropped 33% and 40% at actual and constant currencies, respectively, to £4bn. It reflected a £1.8bn charge as the business settled US claims that its Zantac heartburn drug caused cancer.
Core operating profit, which strips out these litigatory headwinds, rose 11% from 2023 levels.
Strong momentum
GSK’s on a roll at the moment. Following a series of guidance upgrades last year, it’s got 2025 off to a bang and is expecting another year of solid progress.
The Footsie firm expects turnover to rise between 3% and 5% at constant currencies, and core operating profit to advance between 6% and 8%.
GSK also hiked its 2031 sales target, which it said reflected “late-stage pipeline progress”. Turnover is now tipped at £40bn, a £2bn upgrade from prior targets.
Today, the company has 71 Specialty Medicines and Vaccines in clinical development. Of these, 19 are at the Phase III testing or registration phases.
GSK also confirmed it expects five “major” new product approvals in 2025, including Blenrep (which tackles multiple myeloma) and Depemokimab (for severe asthma).
What next?
Investing in pharma shares like this can be dicey business at times. As GSK witnessed last year with Arexy, changes to the regulatory environment can cause havoc among certain product lines.
On top of this, developing medicines is highly complex and therefore unpredictable. Setbacks and the testing or registration phases can, through a blend of sales issues and extra costs, leave earnings forecasts in tatters.
But as today’s update shows, GSK’s making impressive strides even though these threats remain. Indeed, its strong record of pipeline execution remains highly encouraging, the business enjoying around a dozen positive late stage clinical updates in 2024 alone.
Its plans to become a powerhouse in the fields of respiratory, HIV and oncology treatments remain well on track.
Despite today’s rise, GSK’s shares still look cheap compared to those of its industry peers. Its forward price-to-earnings (P/E) ratio is a modest 10.2 times.
While nothing is guaranteed, I’m optimistic that GSK’s low valuation and impressive momentum could lead to more impressive share price gains. I think it’s a top FTSE 100 stock to consider.
