(Reuters) – GlaxoSmithKline forecast on Wednesday that 2019 sales of its shingles vaccine would be more than 1 billion pounds ($1.3 billion) but the British drugmaker’s shares slipped on concerns about its pharmaceutical business and free cash flow.
Shingrix, the shingles vaccine launched in 2017, is an important source of growth for Chief Executive Emma Walmsley, as she strives to improve GSK’s commercial performance after streamlining its operations and spinning off or selling units.
“Shingrix has delivered another fantastic performance in the quarter,” Walmsley said on a media call.
The company said it expected sales of the vaccine to be “significantly” more than 1 billion pounds in 2019.
The strength in its vaccines unit, whose sales rose 20 percent in the quarter to the end of March, comes at a time when some of GSK’s major drugs face generic competition.
Walmsley, who took over as CEO of GSK in 2017, has been looking to re-energise the drugmaker’s pharmaceutical business, its biggest unit, buying U.S. cancer specialist Tesaro for $5.1 billion and giving it a presence in the oncology market.
“They are really refocusing into oncology and that’s going to take some time – to make that transition – so I think its going to be a difficult time for the pharma business,” said John Rountree, a partner at Novasecta Ltd, a biopharma consulting firm, adding that the vaccine business is growing.
GSK shares closed down 0.9 percent at 1,559.8 pence on Wednesday, with traders pointing to the company’s respiratory drug sales, which came in at 631 million pounds, below analysts estimate of 651 million pounds.
Also, weighing on the stock was a 50 percent drop in free cash flow to 165 million pounds in the quarter, partly due to the impact of generic competition for its asthma treatment, Advair.
“GSK has again struggled to turn profits into cash,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
Net debt at GSK, which reiterated its 2019 forecast of a decline in adjusted earnings of 5 to 9 percent, hit 27.1 billion pounds at the end of the quarter from 21.6 billion pounds at the end of 2018, as the drugmaker completed its purchase of Tesaro.
“Investors should probably give GSK the benefit of the doubt, at least for now,” Hyett said.
Sales of Shingrix, which prevents shingles, a viral infection of the skin that causes painful rashes, were 357 million pounds in the three-month period, up 61.5 percent from the fourth quarter.
Analysts had expected quarterly sales of 249 million pounds and are forecasting 2019 sales of 1.17 billion pounds.
Shingrix sales were largely driven by the United States, which benefited from market growth in new patient populations covered by immunization recommendations as well as growth in Canada and the drug’s recent launch in Germany.
Graphic: GSK boosted by Shingles vaccine surge – tmsnrt.rs/2WpG7UU
(For an interactive graphic on Shingrix sales, click here here)
But sales of Advair fell 15 percent to 486 million pounds, due to competition from a generic version.
GSK’s turnover rose to 7.66 billion pounds in the quarter, from 7.22 billion pounds a year earlier, and above a company-provided consensus here of analysts’ forecasts of 7.56 billion pounds.
Adjusted operating profit was 30.1 pence per share in the quarter, versus expectations of 26.1 pence per share.
Reporting by Pushkala Aripaka, Noor Zainab Hussain and Ankur Banerjee in Bengaluru; Editing by Alexander Smith and Edmund Blair