GSK Earnings Call: Specialty Strength Amid Vaccine Drags

GlaxoSmithKline ((GSK)) has held its Q4 earnings call. Read on for the main highlights of the call.

GSK’s latest earnings call struck a notably upbeat tone as management highlighted broad-based profit growth, strong cash generation and accelerating specialty and HIV franchises. While they acknowledged vaccine headwinds, generic and pricing pressures, and currency drag, management argued that upgraded shareholder returns, a deeper pipeline and explicit 2026 targets leave the risk‑reward skewed positively.

Strong Full-Year Financial Performance

GSK reported 2025 sales up 7% to more than £32 billion, powered by higher-margin specialty medicines. Core operating profit rose 11%, with core EPS up 12% and an underlying margin improvement of 110 basis points, even though reported margin landed at 29.9% due to currency.

Robust Cash Generation and Capital Returns

Operations generated £8.9 billion of cash in 2025, or more than £10 billion excluding Zantac-related items, underpinning free cash flow of £4.0 billion and over £5.0 billion on a comparable basis. With underlying free cash generation above £8 billion and net debt to EBITDA around 1.3 times, GSK returned roughly £4 billion via dividends and buybacks while keeping its balance sheet conservative.

Specialty Medicines Driving Growth

Specialty medicines remained the growth engine, with sales rising 17% and respiratory immunology and inflammation advancing 18%. Benlysta grew 22%, Nucala 15% and reached $2 billion in sales for a tenth straight year of double-digit growth, while oncology assets like Jemperli and Ojjaara surged and management guided to low double-digit specialty growth in 2026.

HIV Franchise Momentum

The HIV business delivered 11% sales growth, including a 14% advance in the U.S., driven by rapid uptake of long-acting injectables. Cabenuva grew 42% and now accounts for more than three quarters of quarterly U.S. regimen starts, with long-acting products providing over 75% of growth and about one third of U.S. HIV sales.

Productive R&D and Pipeline Progress

R&D productivity was a key theme, with five FDA approvals and seven pivotal trial starts in 2025 alongside a plan for about 10 pivotal starts in 2026. Management highlighted progress in hepatitis B, chronic cough and metabolic disease, as well as more than five new pivotal antibody-drug conjugate programs, signalling a pipeline designed to support growth beyond current blockbusters.

Active Business Development to Enhance Pipeline

Business development remained active and targeted, with GSK signing an acquisition agreement for Rapp Therapeutics and its Phase II anti-IgE food allergy asset. Executives stressed that three potentially best-in-class specialty assets were added through deal-making, underscoring a strategy of selective external innovation to complement internal R&D.

Vaccine Market Headwinds and Mixed Performance

Vaccines underperformed the broader group, rising just 2% to £9.2 billion as Shingrix growth slowed and partner-managed inventory in China weighed on results. Arexvy grew modestly but is now expected to be flat to slightly down in 2026, and management conceded that U.S. Shingrix momentum has eased as the post-pandemic catch-up phase fades.

GenMed Pressures and Pricing/Gx Risks

General Medicines was slightly down despite TRELEGY growth, with management guiding to flat to low single-digit declines by 2026 amid pricing erosion and generics. The U.S. Medicare redesign impact landed near the top of the £400–£500 million range, reinforcing that policy headwinds and competition will cap growth in the legacy portfolio.

Product-Specific Setbacks and Launch Execution Risks

Not all launches are firing smoothly, as ZEJULA sales declined following tighter FDA labeling and BLENREP faces a slow ramp because of risk management requirements and coordination with eye specialists. Exdensur, despite a strong clinical profile, is also expected to build gradually, highlighting execution risk around converting clinical success into commercial scale.

Currency and Margin Headwinds

Foreign exchange remains a tangible drag, with management flagging that current rates would trim about 3% from 2026 sales and around 6% from operating profit. Currency already depressed the reported operating margin to 29.9% in 2025, masking the underlying expansion and complicating headline comparisons for investors.

One-off Costs and Ongoing Settlements

One-off legal and restructuring items continued to distort optics on cash and margins, including £1.2 billion of Zantac payments in 2025 and £300 million of core fourth-quarter charges tied to productivity initiatives. While these weighed on reported free cash flow, management framed them as largely behind the company and necessary to support future efficiency.

Competitive and Exclusivity Risk in HIV Franchise

Investors were reminded that the HIV engine faces a patent cliff as dolutegravir loses exclusivity from 2028, creating a glide-path risk to existing regimens. The strategy is to shift the base to long-acting treatments on quarterly or semiannual schedules, but executives acknowledged that timing and execution will be critical to offset generic erosion.

R&D Restructuring and Headcount Uncertainty

GSK is reshaping its R&D footprint, with around 350 roles affected across the U.S. and U.K. as resources are reallocated to priority programs. Management argued that the restructuring will streamline decision-making and sharpen focus, but it also introduces near-term transition risk as teams and capital are redeployed.

Forward-Looking Guidance and Outlook

For 2026, GSK guided to sales growth of 3–5% at constant exchange rates and a 7–9% rise in both core operating profit and core EPS, with an increased 70p dividend. Specialty medicines are expected to remain the main driver, while vaccines and General Medicines hover around flat, and management pointed to strong cash generation and improving margins as support for mid-teens profit growth over the 2021–2026 period.

GSK’s call painted a picture of a business in transition but with solid momentum, as specialty and HIV growth, strong cash flows and stepped-up shareholder returns outweighed pockets of weakness in vaccines and legacy drugs. For investors, the story hinges on whether management can deliver on its ambitious pipeline and long-acting HIV strategy while steering through currency, pricing and patent headwinds.