New product launches may continue to fuel GSK Pharma's robust growth

GSK Pharma's recent good showing is on expectations that launches in the specialty segment, increasing investments in promotions and branding

The stock of Glaxo­SmithKline Pharma­ceuticals, or GSK Pharma, has risen over 5 per cent in a week. In the last one month, it has soared over 13 per cent, against a modest three per cent rise in BSE Healthcare index over the same period.

GSK Pharma’s recent showing is on expectations that launches in the specialty segment, increasing investments in promotions and branding, foray into new segments and traction for its vaccines business are expected to drive gains.

This coupled with better than expected performance in the March quarter (Q4FY24) led to a 37 per cent rise in the stock price over the last three months. While brokerages expect a turnaround in its base business as well as gains from new launches, this is already factored into valuations. Given the valuations, further gains from these levels for the stock are unlikely.

In the near term, the Street will keep an eye out for growth. The company had posted a double- digit revenue growth across its key segments of general medicine, specialty and vaccines in the March quarter.

The largest segment of general medicines posted a growth of 12 per cent and this was driven by its key focus antibiotic brands (Augmentin, Ceftum) and Calpol (fever). The company highlighted that the key brands outpaced their respective categories and gained share despite the drug price control impact. 

The vaccine portfolio, which accounts for 18 per cent of revenues, grew by 35 per cent and was led by Infanrix Hexa, Havrix and Boostrix. The segment was in the slow lane over the last two years, given the pandemic and higher offerings in the national immunisation programme (NIP). It has, however, stabilised now registering growth in the last two quarters led by traction in paediatric vaccines, adult vaccines, and growth in products included in NIP. 

Tushar Manudhane and Akash Manish Dobhada of Motilal Oswal Research believe that Glaxo is implementing efforts to improve the growth prospects of its vaccines business by increasing awareness of both paediatric and adult vaccines, relaunching older brands (like Viralix), and launching new brands.

ICICI Securities also expects the company, which has a 23 per cent volume market share, in the paediatric vaccine market, to witness an uptick in this business.

Abdulkader Puranwala of ICICI Securities says that with recovery in the private market underway, key brands like Infanrix Hexa, Havrix and Boostrix are growing faster. He expects a 15 per cent growth in the vaccine business over the FY24-26 period. Supplies to the NIP accounts for 40 per cent of its vaccine sales. 

Growth in the specialty portfolio was led by asthma drugs Nucala and Trelegy and accounted for 3 per cent of revenues. The company is also planning to launch cancer drugs Zejula and Jemperli which will mark its entry into oncology therapy. 

ICICI Securities expects a gradual recovery in sales amid field force rationalisation (down 20 per cent). This is likely to drive a 10 per cent growth in revenues while operating profit and net profit are expected to grow by 12 per cent and 10 per cent respectively over FY24–26. The brokerage revised its earnings upwards by 10-11 per cent over the next two years and upgraded its rating from reduce to hold. 

Motilal Oswal Research expects the company to deliver a revenue, operating profit and net profit growth in the 8-10 per cent band over FY24-26 on the back of an increase in brand awareness, new launches in vaccines and specialty segment, volume takeoff in portfolio under price control and traction in new launches such as Trelegy Ellipta/Shingrix. The brokerage, however, has a neutral rating given that positives already in the price.