Prime-Time Battles Drive GSK And Novo Nordisk In 2023; Novartis Preps Its Spinoff

GSK (GSK) and Novo Nordisk (NVO) will face prime-time battles this year, an analyst said Wednesday as GSK stock rose and NVO stock fell. Meanwhile, Novartis (NVS) stock skidded on its mixed-bag quarterly report.

The battles pit GSK against Pfizer (PFE) and Novo Nordisk against Eli Lilly (LLY).

Both GSK and Pfizer are approaching Food and Drug Administration review dates for their respiratory syncytial virus vaccines. RSV causes cold-like symptoms in most people, but it can be deadly in infants and older adults with weak immune systems. Novo and Lilly are trading hits in obesity treatment.

But it's anyone's guess which companies will come out on top once the dust settles, says Sebastian Skeet, analyst for research firm Third Bridge. In a note to clients, he said GSK's full-year outlook shows "some increased momentum" while Novo is "forecasting record profits."

In morning trading on the stock market today, GSK stock rose 1% and NVO stock dipped a fraction. Novartis stock skidded 3.2% near 87.70. Novartis stock is forming a flat base with a buy point at 93.41, according to MarketSmith.com.

GSK Stock: Vaccines Remain Key

Bullishly, U.K. pharma giant GSK beat fourth-quarter expectations on Wednesday. Sales grew 4% to roughly $9.08 billion while adjusted earnings increased 10% to about 90 cents per share, according to analysts polled by FactSet.

In constant-currency, sales slipped 3% and adjusted profit fell 6%.

The best growth came from GSK's specialty medicines division where sales surged 37% on a strict, as-reported basis. Behind that, revenue from vaccines and general medicines increased a respective 17% and 5%.

GSK noted exchange rates and an unfavorable comparison due to strong sales of Covid products had an impact on growth. Offsetting that, the company posted record sales of shingles vaccine Shingrix. Shingrix sales surged 72% to about $3.65 billion.

Third Bridge's Skeet says Shingrix is a concern for some GSK stock investors.

"However, GSK note potential re-vaccination after 10 years could extend the U.S. growth runway and certain key non-U.S. markets remain underpenetrated," he said.

For the year, GSK called for 6%-8% sales growth and 12%-15% increase in adjusted earnings. Both measures exclude the potential impact from GSK's Covid products. Wall Street called for about $3.47 in adjusted earnings per share and $35.36 billion in sales.

Obesity Battle Drives NVO Stock

Novo Nordisk posted strong fourth-quarter growth with sales ramping 25.5% to 48.09 billion Danish krone. That translates to about $7.04 billion in sales. Adjusted earnings also surged 26.5% to 6.02 DKK per share — about 88 cents. Both measures beat NVO stock analysts' forecasts.

But the real focus is on Wegovy, Third Bridge's Skeet said in a separate note. Wegovy is Novo Nordisk's treatment for obesity. The same chemical behind it, semaglutide, sells in other formations for diabetes treatment. Likewise, Lilly is testing tirzepatide in obesity. The same compound sells in diabetes as Mounjaro.

"Whilst Eli Lilly's Mounjaro appears to be superior to Novo Nordisk's Wegovy on weight loss and other clinical outcomes, the market is so large and underpenetrated that there is more than enough room for the two competitors," Skeet said.

To that point, Wegovy sales catapulted 213% to 2.45 billion DKK in the fourth quarter. That comes out to about $358.3 million. NVO stock analysts are watching the company's efforts to basically relaunch Wegovy in the U.S., where supply constraints caused shortages.

For the year, Novo Nordisk predicted 13%-19% sales growth, excluding the impact of exchange rates. NVO stock analysts called for earnings of 30.01 per share Danish krone and sales of 198.84 billion Danish krone — or about $4.42 and $29.06 billion, respectively.

Novartis Stock Dinged On Light Sales

For Novartis stock, investors focused on light fourth-quarter sales, which skidded 4% to $12.69 billion during the fourth quarter. Core earnings, on the other hand, rose 9% to $1.52 per share. Excluding the impact of exchange rates, earnings surged 19% while sales moved 3% higher.

Novartis confirmed its plan to spin off its generic medicines division Sandoz in the second half of the year. During the quarter, Sandoz sales slipped 8% to $2.3 billion. Revenue from what Novartis calls its innovative medicines division also fell 3% to $10.4 billion.

In constant currency sales were flat and grew 3%, respectively.

For the year, Novartis called for sales to grow by a low-to-mid single-digit percentage. Analysts who follow Novartis stock predicted earnings of $6.47 a share and $52.46 billion in sales.

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