GSK Q1 2025 earnings: Specialty medicines power growth as pipeline builds investor confidence

GSK plc delivered a resilient start to the year, with strong financial results in the first quarter of 2025 propelled by continued momentum in its Specialty Medicines portfolio, expanding HIV market share, and targeted oncology investments. The pharmaceutical major reaffirmed its full-year outlook despite headwinds in vaccine performance, positioning itself for sustained growth through pipeline development, strategic M&A, and proactive tariff mitigation measures in key markets like the United States.

Why Did GSK’s Revenue and EPS Increase in Q1 2025?

GSK reported total turnover of £7.52 billion for Q1 2025, a 4% year-on-year increase at constant exchange rates (CER), and a 2% rise at actual exchange rates (AER). This growth was led by a 17% CER surge in Specialty Medicines revenue. The company’s core earnings per share rose 5% to 44.9p, while total reported EPS climbed a significant 56% to 39.7p, partly due to a sharp reduction in contingent consideration liabilities from prior acquisitions.

Core operating profit increased 5% year-over-year to £2.53 billion, reflecting efficient cost discipline alongside elevated investment in research and development for high-growth pipeline candidates. Free cash flow more than doubled to £697 million, driven by improved operational performance and timing-related benefits in returns and rebates.

What Fueled the Surge in GSK’s Specialty Medicines Segment?

Specialty Medicines remained GSK’s primary growth driver, with revenue reaching £2.93 billion—up 17% at CER. This included robust double-digit gains across HIV, respiratory, inflammation, immunology, and oncology therapies.

HIV medicines generated £1.71 billion, a 7% increase, largely supported by the growing adoption of long-acting regimens such as Cabenuva and Apretude, along with sustained demand for oral two-drug regimen Dovato. Notably, long-acting regimens now account for 22% of the HIV portfolio’s global sales and 29% of the U.S. total, signaling strong patient preference for less frequent dosing options.

Respiratory and inflammation revenues climbed to £804 million, up 28% year-on-year. Key contributors included Nucala, which recorded 21% growth due to broad clinical demand, and Benlysta, which surged 39%, particularly in the U.S. where payer coverage and physician uptake remained strong.

In oncology, revenue expanded 53% to £415 million. Jemperli doubled sales year-on-year following its FDA label expansion in frontline endometrial cancer. Ojjaara and its European counterpart Omjjara also contributed significantly, marking strong launches in Japan and the EU following U.S. approval last year.

Why Did GSK’s Vaccine Revenue Decline Despite Portfolio Breadth?

Vaccine sales declined 6% CER to £2.1 billion in Q1 2025. This drop was driven by softness in key franchises, including Shingrix and Arexvy.

Shingrix revenue dropped 7% to £867 million as vaccination growth moderated in difficult-to-access patient groups in the U.S. and channel inventory adjustments distorted quarter-on-quarter comparisons. Internationally, the absence of repeat national campaigns, especially in Australia, contributed to the decline.

Arexvy, GSK’s RSV vaccine for older adults, declined 57% year-on-year to £78 million due to limited CDC recommendations for individuals aged 60–74. Despite this, GSK retained leadership in retail RSV vaccine market share and showed promising uptake in Germany.

In contrast, meningitis vaccines performed strongly, with 20% CER growth. Bexsero and Menveo benefited from national immunisation support in countries including France, Switzerland, and Germany.

How Did General Medicines Perform Amid Competitive Headwinds?

General Medicines revenue remained flat year-on-year at £2.49 billion. Trelegy continued to stand out, with a 15% sales increase to £675 million. Growth was underpinned by strong demand for single-inhaler triple therapy (SITT) in asthma and COPD.

However, general respiratory and other therapies saw modest declines. Respiratory products excluding Trelegy grew only 1%, while non-respiratory general medicines declined 3%, largely due to price erosion and volume pressures in international markets, particularly emerging economies.

What Did Regional Trends Reveal About GSK’s Performance?

From a geographic perspective, the United States remained GSK’s largest market, generating £3.75 billion in revenue, up 4% CER. Specialty Medicines led this growth, though pricing dynamics were affected by the implementation of the Medicare Part D redesign under the U.S. Inflation Reduction Act.

Europe posted the highest growth rate of 11% CER to £1.75 billion, supported by HIV, oncology launches, and vaccine rollouts. International revenue declined 2% to £2.01 billion, impacted by weak performance in China and lower vaccine contributions in Australia, alongside currency-related headwinds.

What Progress Has GSK Made on Pipeline Milestones and Approvals?

GSK achieved two FDA approvals in Q1 2025: Penmenvy, its meningococcal ABCWY vaccine, and Blujepa, a novel antibiotic for uncomplicated urinary tract infections. The company is anticipating further regulatory decisions this year, including for Blenrep in relapsed multiple myeloma, depemokimab in severe asthma, and Nucala in COPD.

The company reaffirmed that 14 current pipeline assets each have peak annual sales potential exceeding £2 billion. Among them, the ENDURA Phase III trial for depemokimab and upcoming oncology ADC studies (e.g., GSK’227 for small-cell lung cancer) were spotlighted for their strategic importance.

What Capital Deployment Strategy Did GSK Follow in Q1 2025?

GSK generated £1.3 billion in operating cash flow and £697 million in free cash flow during Q1. The company returned £612 million to shareholders through dividends and executed £273 million in share repurchases under its £2 billion buyback programme. A Q1 dividend of 16p per share was declared, in line with full-year guidance of 64p.

Net debt stood at £13.95 billion, rising slightly due to M&A activity and shareholder returns. Nonetheless, GSK maintained a stable credit outlook, supported by its predictable cash generation and strategic focus on core therapeutic areas.

How Is GSK Preparing for U.S. Tariffs and Regulatory Challenges?

GSK acknowledged the U.S. Section 232 investigation on pharmaceutical imports under the Trade Expansion Act. Management stated the company is “well-positioned to absorb potential tariff shocks,” highlighting its ongoing investment in U.S. manufacturing infrastructure and operational agility. In parallel, productivity programmes and AI-led process optimisation are expected to generate offsetting cost savings.

What Is the Market Sentiment Around GSK’s Q1 2025 Results?

Investor sentiment following the Q1 earnings release has been cautiously optimistic. GSK shares rose 2.4% on results day, reflecting confidence in the company’s Specialty Medicines-led growth and consistent pipeline execution. The earnings beat reassured investors after a volatile macro environment in late 2024.

Equity analysts broadly acknowledged the strength of the HIV and oncology franchises. The 53% growth in oncology revenues and leadership in long-acting HIV formats were seen as durable competitive advantages. These trends, coupled with upcoming late-stage readouts, have led several brokerages to reiterate a “hold” or “accumulate” rating on GSK shares.

Institutional investor flows have remained balanced, with steady participation from major European and U.S. healthcare-focused funds. Portfolio managers cited satisfaction with free cash flow delivery and capital return execution. Some did note concerns over Arexvy’s slow ramp, and the potential headwind from Medicare pricing pressures.

The broader sentiment remains neutral to moderately positive, with GSK’s reaffirmation of FY2025 guidance providing near-term confidence. Analysts have flagged the company’s strong balance sheet and execution consistency as key positives, particularly in contrast to some peers facing patent cliffs or failed trials.

What’s the Outlook for the Rest of FY2025?

GSK reaffirmed its 2025 guidance: turnover growth of 3–5% CER, core operating profit growth of 6–8% CER, and core EPS growth of 6–8%. The guidance includes the impact of a higher tax rate of around 17.5% and an upgraded royalty income range of £750–800 million due to a recent IP settlement.

Management expects continued Specialty Medicines growth in the low double digits, led by HIV, respiratory, and oncology. Vaccine revenues are forecast to stabilise in H2 2025, supported by international RSV rollout and new meningitis contract wins. General Medicines is expected to remain stable to slightly declining, depending on pricing dynamics.

Looking ahead, GSK’s late-stage pipeline will be a critical driver of market re-rating. Key readouts from depemokimab and oncology ADCs could reshape the company’s revenue mix over the next 12–18 months. Analysts also expect increased business development activity, particularly in neuroscience and inflammation, as the company leverages its balance sheet and tax-efficient structure.