GSK’s first-quarter sales landed broadly as expected, rising 5% to £7.6bn excluding currency moves. Growth in speciality medicines and vaccines more than offset a decline in general medicines.
A favourable shift in product mix and cost reductions helped drive underlying operating profit up 10% to £2.7bn.
Free cash flow increased by £0.1bn to £0.8bn, and net debt stood at £15.6bn.
A quarterly dividend of 17p per share was declared with 70p expected for the year as a whole. The ongoing £2.0bn buyback program has £0.3bn left to run.
2026 guidance is unchanged, as is the 2031 sales outlook of over £40bn. This year’s sales are expected to grow by 3-5%.
The shares fell 2.4% in early trading.
Our view
GSK’s first quarter shows solid progress towards full-year targets. While the valuation has lost some of its froth in the weeks leading up to results, it still felt like investors wanted more on the day.
There are plenty of pipeline catalysts to watch out for this year, with key clinical read-outs weighted to the second half. Although compared to 2025, the focus has moved slightly away from product approvals towards late-stage trials, pushing the probability down and the timeline out for potential commercial success. GSK’s recent success rate has been impressive, but it’s important that this trend continues if it’s to offset the impact of forthcoming patent expirations.
Headwinds for US vaccine sales are being offset by strong demand in the category overseas. Growth is set to remain muted or negative for the immediate future, but we see scope for a recovery as the regional mix changes, and US comparisons ease.
Elsewhere, the group also has a strong presence in HIV treatments, which make up over 20% of total revenues. Its newer HIV treatments are a key part of the story, and they’re seeing some impressive growth. A strong clinical pipeline of next-generation HIV therapies should further help bolster GSK’s market position.
Meanwhile, Cancer treatment, although relatively small in terms of current sales, is growing rapidly. Recent approvals and launches in new markets mean there are strong growth drivers for the existing portfolio, which although concentrated, focus on first or best-in-class medicines.
Net debt crept up last year, but at about 1.4x cash profits, we’re reasonably comfortable with this level. Improving underlying cash generation helps support a prospective dividend yield of 3.6% and share buybacks, but remember, no payouts to shareholders can be assured, especially if further investment priorities are identified.
Pressure on drug pricing remains a key risk to monitor. But it’s something on which GSK has worked hard to mitigate, and this year’s guidance is up to speed on the latest developments in price agreements and tariffs. However, we can’t rule out further changes.
GSK’s consistent delivery of financial and clinical progress has seen the valuation significantly strengthen over the last year. We think the company is well placed to meet its medium-term growth targets, but consensus forecasts suggest there’s more work to be done to convince the market. If that gap can be bridged, we see scope for more upside, but there can be no guarantees.
Parties related to the author hold shares in GSK.
Environmental, social and governance (ESG) risk
The pharmaceuticals sector is relatively high-risk in terms of ESG. Product governance, particularly with safety and marketing, and affordable access to treatment are the key risk drivers. Labour relations, business ethics and bribery and corruption are also contributors to ESG risk.
According to Sustainalytics, GSK's overall management of material ESG issues is strong.
There's an independent, board-level, corporate responsibility committee focused on ESG performance and framework and 10% of executive pay is tied to ESG metrics. It's ranked first on both the Access to Medicine Index and Access to Vaccines Index thanks to industry-leading efforts to ensure medicines and vaccines are provided to patients in need. Management practices concerning the transparency of clinical trials are strong, and it's committed to international standards. But despite a strong product safety programme, GSK lacks external quality management certification at its manufacturing sites.
GSK key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.