GSK Q1 2025 Earnings: Core EPS Beats, Specialty Growth Outshines Revenue Miss

GSK’s first-quarter 2025 earnings report highlighted a classic case of mixed results: core earnings per share (EPS) surpassed expectations, while revenue fell short. The pharmaceutical giant reported core EPS of $1.13, beating the consensus estimate of $1.08, driven by strong performance in its high-margin Specialty Medicines segment. However, revenue of $9.46 billion (£7.52 billion) missed estimates by $80 million, underscoring challenges in vaccines and legacy products. This article dissects the drivers behind the results and evaluates GSK’s long-term investment potential.

Key Financial Highlights

• Core EPS Growth: Up 4% year-over-year (YoY) reported and 5% at constant exchange rates (CER), fueled by favorable product mix and lower financing costs.
• Revenue: Rose 2% reported and 4% at CER, but missed estimates due to declines in vaccines and softness in General Medicines.
• Segment Performance:
• Specialty Medicines: Surged 17% at CER, led by HIV treatments (up 7%), including Apretude (+63%), Dovato (+19%), and Cabenuva (+38%). Oncology sales jumped 53%, driven by Jemperli and Ojjaara.
• Vaccines: Dropped 6% at CER, with RSV vaccine Arexvy collapsing 57% due to U.S. CDC restrictions and Shingrix down 7%.
• General Medicines: Flat at CER, with gains in respiratory therapies offsetting declines in legacy drugs like Advair (-21%).

Growth Drivers: The Specialty Medicines Engine

GSK’s Specialty Medicines segment is the star of its portfolio, accounting for 17% CER growth and signaling a strategic pivot toward high-margin therapies. Key catalysts include:
1. HIV Innovation: Apretude, the injectable PrEP drug, is capturing share in a market GSK estimates at 1.2 million eligible U.S. patients. Its dominance over oral competitors (e.g., Descovy) is amplified by the convenience of quarterly injections.
2. Oncology Breakthroughs: Jemperli (dostarlimab) and Ojjaara (tiradjanib) are driving £286 million in combined sales, with Blenrep (belantamab mafodotin) pending regulatory decisions that could unlock further growth.
3. Respiratory/Immunology: Nucala (up 21%) and Benlysta (up 39%) are expanding into new indications, such as COPD for Nucala, which could add $500 million+ in annual sales if approved in May.

Weaknesses: Vaccines Struggle and Legacy Product Declines

While Specialty Medicines shine, two areas drag down GSK’s results:
1. Vaccine Headwinds:
- Arexvy: The RSV vaccine faces regulatory restrictions in the U.S. for adults aged 60–74, limiting its commercial potential.
- Shingrix: Declining by 7%, reflecting reduced demand post-pandemic.
- No sales from the Sanofi-partnered COVID-19 booster, as demand has evaporated.
2. Legacy Product Erosion:
- Respiratory stalwarts like Advair (down 21%) and Flovent (down 27%) continue to lose share to newer therapies.
- Older HIV drugs like Triumeq (down 20%) are being replaced by newer regimens.

2025 Guidance: Relying on Specialty and Cost Discipline

GSK reaffirmed its 2025 outlook:
- Revenue Growth: 3–5% at CER, with Specialty Medicines growing low double digits, Vaccines declining low single digits, and General Medicines stable.
- EPS Growth: 6–8% at CER, supported by cost controls (despite 8% rise in SG&A expenses) and a 2% increase in R&D spending to fuel pipeline advancements.
- Pipeline Milestones: Five new products/line extensions planned, including Blenrep (multiple myeloma) and Nucala for COPD, which could add over £1 billion in peak sales.

Investment Considerations

1. Stock Performance: Shares rose 3% pre-market, reflecting investor optimism in GSK’s long-term strategy. Year-to-date, the stock is up 15%, outperforming the healthcare sector’s 4% decline.
2. Risks:
3. Vaccine Pipeline Dependence: Success hinges on late-stage assets like camlipixant (chronic cough) and depemokimab (atopic dermatitis).
4. U.S. Pricing Pressure: Oncology drugs like Zejula (-5%) face headwinds from Medicare price controls.
5. Valuation: At 16x forward P/E, GSK trades at a discount to peers (e.g., Pfizer’s 23x), reflecting near-term headwinds but offering upside if Specialty growth accelerates.

Conclusion: A Buy for the Long Term

GSK’s Q1 results underscore its transition from a mass-market pharma player to a specialty-focused innovator. While near-term revenue growth remains constrained by vaccines and legacy products, the pipeline’s potential—particularly in HIV, oncology, and respiratory therapies—positions GSK for sustained EPS growth. With a 2031 sales target of £40 billion+ and a robust R&D engine (70 clinical assets, including 18 in late-stage), the stock appears attractively priced for investors willing to overlook short-term volatility.

Final Take: GSK’s Specialty Medicines momentum and disciplined execution justify a Hold to Buy rating, especially for long-term investors. Monitor upcoming catalysts, including Nucala’s COPD decision (May 2025) and Blenrep’s regulatory updates, for upside triggers.

Data as of Q1 2025. Past performance does not guarantee future results.