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Glaxo (GSK) to Report Q2 Earnings: What's in the Cards?

GlaxoSmithKline plc GSK will report second-quarter 2021 results on Jul 28, before market open. In the last reported quarter, the company’s earnings were in line with the Zacks Consensus Estimate.

Shares of Glaxo have underperformed the industry so far this year. The stock has gained 6.6% compared with the industry’s increase of 10.1%.

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Glaxo’s earnings surpassed estimates in two of the trailing four quarters, missed the same once and met once, delivering an earnings surprise of 1.12%, on average.

Factors to Consider

During the second quarter, Glaxo’s revenues are likely to have been driven by newer respiratory and HIV drugs, partially offset by weaker vaccine sales and decline in sales of Established Pharmaceuticals segment. The impact of Advair generics and rising competition for the older HIV drugs, especially the three-drug regimens, might have hurt sales. Revenues declined significantly from continued disruptions due to the COVID-19 pandemic in the first quarter of 2021. Some impact of the pandemic might have continued in the second quarter. The Zacks Consensus Estimates for revenues stood at $10.55 billion.

The growth trend in Respiratory category sales is expected to have continued in the second quarter on the back of strong demand for Trelegy Ellipta and Nucala despite the pandemic. At-home administration of these drugs has helped them remain in the positive territory. However, older respiratory drugs — Advair and Relvar/Breo Ellipta — facing competitive and pricing pressure are likely to have unfavorably impacted Glaxo’s sales.

Demand for Glaxo’s key vaccine, Shingrix, as well as other vaccines in its portfolio was significantly hampered in the past couple of quarters due to the prioritization of COVID-19 vaccination, especially in the United States and the United Kingdom. Stay-at-home directives in the United States have led to lower vaccination rates. The trend is likely to have continued in the second quarter.

Sales of meningitis vaccines, including Bexsero acquired from Novartis AG NVS, were hurt in the first quarter. The COVID-19 vaccine prioritization is likely to have hurt sales of these vaccines in the second quarter.

Sales of Glaxo’s lupus drug, Benlysta, showed impressive growth in the previous two quarters despite COVID-19 related disruption. We expect the momentum to have continued in the soon-to-be reported quarter. The drug’s approval in Europe in May is likely to have brought additional revenues.

Oncology sales, comprising sales of Zejula and Blenrep, are also likely to have witnessed growth. Moreover, approval to Jemperli in the United States and Europe for treating endometrial cancer in April might have boosted oncology segment sales.

Meanwhile, the competitive environment and the shift in portfolio toward two-drug regimens may have hurt sales of three-drug regimens — Tivicay and Triumeq — and older HIV drugs. However, the strong growth trend witnessed in two-drug regimens, Juluca and Dovato, might have helped the company to partially offset some of the losses in sales of three-drug regimens.

Second-quarter sales of consumer healthcare business are likely to have been hurt due to loss of sales from divested brands and weaker sales of Respiratory health segment.

The company will also likely provide updates related to demerger of Consumer Healthcare business anticipated in mid-2022 on its earnings call.

Recent Key Developments

Glaxo received emergency use authorization for its first COVID-19 therapy, sotrovimab (VIR-7831) in late May. The drug is authorized for the treatment of mild-to-moderate COVID-19 in high-risk adults and pediatric patients. The company has developed the treatment in partnership with Vir Biotechnology VIR. Second-quarter results will provide some insight on the uptake of the drug amid COVID-19 pandemic.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Glaxo this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Earnings ESP: Glaxo has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 54 cents per ADS.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Glaxo has a Zacks Rank #3.

GlaxoSmithKline plc Price and EPS Surprise

GlaxoSmithKline plc price-eps-surprise | GlaxoSmithKline plc Quote

Stock to Consider

Here is a large biotech stock that you may also want to consider, as our model shows that it has the right combination of elements to post an earnings beat this season.

Pfizer PFE has an Earnings ESP of +2.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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