GSK pipeline doubts, vaccine underperformance overshadow sales beat

By Pushkala Aripaka

Oct 28 (Reuters) - GSK investors punished the British drugmaker on Wednesday despite a third-quarter sales and profit beat, focusing instead on questions over its drug pipeline and weak sales of vaccines, including its shingles shot Shingrix.

The company's London-listed shares were down around 4% by 1430 GMT, after tumbling 7.3% earlier in the day, and were on track for their steepest slide since April, largely erasing gains made since CEO Luke Miels took over in January.

Miels is steering GSK through a major strategic overhaul and laid out a £1.9 billion ($2.5 billion) cost-savings plan in July to generate cash to fund drug development and prepare GSK for looming patent losses - a worry facing peers through the sector.

But investors are still to be convinced, worried about where growth will come from. Current market forecasts for 2031 sales of £36.64 billion are well below GSK's own target of more than £40 billion in annual revenue by then.

"Cost management progress will be received well in general, (but) it suggests the outperformance is almost entirely driven by cost timings rather than underlying business momentum," said Verso Investment Management analyst James Eugene.

"Pipeline credibility is more of a medium-term concern."

CEO Miels said after the earnings that the company was "playing a very long-term game" and would stay focused on operational delivery, execution and accelerating R&D.

"We just need to keep executing, putting one foot in front of the other and quietly getting on with it," he told journalists.

PIPELINE IN FOCUS AS TARGETS MAINTAINED

Sales of specialty medicines for HIV, respiratory conditions and cancer jumped 15% and drove the turnover beat for the three months to September 30, but revenue from newly launched asthma drug Exdensur and GSK's vaccines business missed expectations.

The company maintained its annual outlook but said R&D spending is expected to grow faster than sales. It expects to start 22 late-stage studies by the end of 2026, 18 of which are already under way, focusing on specialty medicines and vaccines.

The group is trying to reduce reliance on its blockbuster HIV medicine dolutegravir, which faces patent expiries between 2028 and 2030, and develop longer-acting alternatives such as Apretude which analysts and investors are keenly tracking.

GSK expects 2026 turnover growth in the upper half of its 3%-5% forecast range and core earnings-per-share growth in the lower half of its 7%-9% range.

RESTRUCTURING UNDER WAY

GSK has said it will free up investment for new medicines including with job cuts, as it rebuilds its cancer business seen as a major contributor in the longer term.

The company on Wednesday said its moves would have a "limited" impact in the UK after it announced plans to cut 1,217 jobs in Belgium this month.

GSK did not divulge many details on its restructuring drive but Miels said the company was "slightly ahead" of plan. It took a £328 million charge related to the programme in the quarter.

Core profit was 54.6 pence per share on turnover of £8.89 billion, beating analysts' expectations of 50.4 pence and £8.84 billion respectively.

($1 = 0.7527 pounds)

(Reporting by Pushkala Aripaka, Sri Hari N S in Bengaluru and Bhanvi Satija in Madrid; Editing by Sherry Jacob-Phillips, Barbara Lewis, Adam Jourdan and Keith Weir)