Q2 2021 Results
Presentation to Analysts
Wednesday, 28 July 2021
Iain Mackay (CFO): Good morning and good afternoon, thank you for joining us for our second quarter 2021 results, which were issued earlier today. You should have received our press release, and can view the presentation on GSK's website. For those who are not able to view the webcast, slides that accompany today's call are located on the Investor section of the GSK website.
Cautionary statement regarding forward-looking statements
Before we begin, please refer to Slide 2 of our presentation, for a Cautionary Statement.
Our speakers today are Emma Walmsley, Luke Miels, Deborah Waterhouse, Dr Hal Barron, Brian McNamara and myself, Iain Mackay. Joining us for the Q&A portion of the call will be Roger Connor and David Redfern. We request that you ask only a maximum of two questions, so that everyone has a chance to participate.
Our presentation will last for approximately 30 minutes, in order to maximise the opportunity for questions, and with that I will hand the call over to Emma.
Q2 2021: Strong financial performance and execution of strategic priorities
Emma Walmsley (CEO): Thank you, Iain, and a very warm welcome to you
We are pleased to report a strong financial performance and continued progress against our strategic priorities this quarter. Second quarter sales and adjusted EPS were up 15 and 71% respectively at CER. These excellent results were driven by a combination of strong double-digit growth in New and Specialty pharma products, a significant increase in Vaccines sales, reflecting both an improving picture of vaccination rates and a major sales contribution from our pandemic adjuvant, good growth in Consumer Healthcare brands, with double-digit growth in six of the nine power brands, and continued discipline in control of costs.
As expected, the quarter did benefit from a favourable comparison to the second quarter last year, which was heavily disrupted by the pandemic, and whilst further disruption cannot be ruled out, we are seeing positive momentum which we expect to continue through the second half of the year.
Assuming a second half backdrop of improving demand for adult vaccinations and normalising health and consumer trends in key markets, we believe we are likely to deliver adjusted EPS at the better end of our guidance. I just want to remind you that this guidance excludes any contribution from COVID-19 solutions, which we expect to add between 4 and 6% to our adjusted EPS in 2021.
Alongside our financial performance we continue to make good progress in R&D and our strategic delivery. Among our key assets, we completed the filing of long-acting cabotegravir for prevention of HIV and we announced positive headline results for all five Phase 3 studies of our promising Specialty medicine daprodustat. Very importantly, we also continued to strengthen the pipeline this quarter, securing three exciting new collaborations in HIV, immuno-oncology and immuno-neurology.
Lastly, this quarter also saw us lay out our new growth outlook for GSK and the proposed de-merger of Consumer Healthcare: delivering scale health impact, and maximising value for shareholders, are at the core of these plans, and we have received widespread support from shareholders for them, together with a clear message to f ocus on execution and successful delivery. We are all strongly committed to doing so.
Progress made across all strategic priorities in Q2
Progress for this quarter is reflected across all three of our strategic priorities: in Innovation we continue to build a high-value pipeline across prevention and treatment of disease through organic and inorganic delivery; in Performance improved commercial execution is driving strong growth in New and Specialty pharma products.
For Shingrix specifically we are clearly seeing the beginnings of a recovery in performance as COVID vaccination programmes amongst older populations near completion. The US new to brand prescriptions for Shingrix were up 73% in the quarter, and we saw good performance across the Consumer business, with the exception of sustained weakness in cold and flu and a few specific areas where consumer trends haven't yet returned to normal.
On Trust, we continue to maintain leadership in ESG, as evidenced by new index ratings. We recently signed a principal partner for COP26 and continue to progress our environmental commitments to be net zero and nature positive by 2030.
Priority is to unlock potential and maximise value for shareholders
As you heard at our Investor Update, the scale of the changes we have made in the last four years is unprecedented; to improve performance, strengthen capabilities and prepare GSK for a new future. Our clear priority is to unlock the potential of two world-class businesses and in so doing, maximise value for shareholders.
With the platform we now have for GSK, we expect to deliver highly competitive sales and operating profit growth in the next five years, a step-change in expected performance and we aim to achieve sales of more than £33 billion by 2031 all underpinned by an R&D focus on the power of the immune system, a portfolio shift to Vaccines and Specialty medicines to prevent and treat disease and impacting the lives of 2.5 billion over the next ten years.
Through the proposed demerger we will create a new category-leading Consumer healthcare business serving over 100 markets with annual sales in 2020 of £10 billion, driven by brands and innovation to deliver better everyday health. This business has strong prospects for sustainable sales and profit growth, high cash generation and to deliver attractive returns for shareholders.
Let me now hand over to the team to talk you through this quarter's performance in more detail. Luke, first over to you.
Luke Miels: Thanks, Emma. We continued to make progress on commercial execution and competitiveness in the quarter against a complicated external environment due to COVID. The strong in-market performance I highlighted in the recent quarters for products such as Trelegy, Nucala and Benlysta has continued driving growth of New and Specialty pharma products of 25% in the second quarter and 14% in the half year.
We also saw a good recovery in the quarter in Meningitis and Established Vaccines, so today I want to focus my remarks on the performance and growth prospects for Shingrix and our Oncology products.
Shingrix: strong underlying demand supports confidence in recovery
For Shingrix, our confidence in recovery has been tied to the prioritisation and successful rollout of COVID-19 mass vaccinations, particularly in the US. Underlying trends illustrate that Shingrix volumes are expanding as we move into the second half of the year. Overall, despite a slower rate of recovery in ex-US markets, we anticipate a strong half two
global performance from Shingrix with the potential for slight growth in sales on a full-year basis.
In the US with nearly 80% of adults aged 55 plus now fully vaccinated for COVID, we have now seen a related increase in weekly NBRx volumes which have grown 73% since the start of quarter two.
In the coming months, it's going to be important for the recovery of Shingrix in the US as our updated research shows that around half of those eligible to receive Shingrix have indicated that they expect to get it within one to three months following the completion of their pandemic vaccine series.
We have been implementing activities to drive this recovery with a comprehensive multi-channel DTC campaign and by focussing on our relationships with US retailers, particularly as we focus on the 'flu vaccination season where adult vaccinations become increasingly top of mind for consumers.
We are starting to see similar trends in Germany where volumes are improving as more adults complete their COVID-19 vaccination series and in China we continue to make steady progress in the private pay market with Shingrix now in 50 cities.
Overall though, we are seeing a slower rate of Shingrix recovery ex-US due to the different rates of deployment of COVID vaccinations.
Looking ahead, we continue to roll out in new markets, including the UK, and we are now benefiting from an unconstrained supply position.
Now this is going to support the expected significant step up in Shingrix sales in 2022, assuming continuation of the improved operating environment, as well as our ambition to double revenues in the next five years protecting more than 100 million adults.
Recent oncology launches contributing to growth
If I now move to Oncology, Zejula had a strong performance, despite the impact of COVID on the ovarian cancer market. Sales were up 38% versus Q2 2020 and we are pleased that in the US we are significantly leading in new patient starts with 59% of patients going to a PARPi receiving Zejula.
We are also seeing progress in US patient awareness, which has significantly increased from 29% at April 2020, to almost 50% in June 2021, and a decrease, pleasingly, in the watch-and-wait usage, now at 57%, although there is room for improvement.
Unfortunately, with the backdrop of COVID, there is still a 20% decrease in ovarian cancer diagnoses, and we know that with delayed diagnosis there are less patients getting
debulking surgeries, and, therefore, less patients going onto maintenance about six months later. So, we expect that is impact will continue until the market returns to pre-pandemic levels.
For Blenrep we have seen encouraging progress, despite competitive entrants, and we are especially pleased to see demand increasing with community Oncologists in the US and also Germany.
We have a very robust clinical programme designed to continue to improve the profile of Blenrep through various combinations, optimised dosing and scheduling.
On this side we have outlined the patient opportunity and the associated clinical trials that align to earlier lines of treatment.
The outcomes of these trials will evolve our strategy, including potential use of novel combinations and the substantial opportunity we can see in second line, where we have dose-optimised pivotal trials, and with that, I will pass over to Deborah for an update on the HIV portfolio.
HIV: Delivering sustainable growth
Deborah Waterhouse: Thank you, Luke.
Second quarter HIV sales rebounded strongly, growing by 14% and more than reversing the 11% decline that we reported in Q1 due to COVID impacts and the strong 2020 comparator.
Growth in the first half of the year was 1%.
Strong commercial execution continues to drive the performance of Dovato, particularly in the switch market in the US and Europe.
Dovato and Juluca are on track to deliver £1 billion in sales this year. Our recently launched innovative medicines, including Rukobia, now account for more than 25% of our total sales.
A highlight this quarter was the market share of dolutegravir-based regimens in Europe, which for the first time exceeded 30%, driven by Dovato.
Share continues to hold firm in the US.
Turning to our portfolio of long-acting injectables, in January we received FDA approval for Cabenuva, the world's first long-acting injectable treatment for HIV. It is also approved in Europe under the brand name of Vocabria/Rekambys and dosing every two
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