Executive Summary / Key Takeaways

• Strategic Transformation Bearing Fruit: GSK has successfully pivoted to a focused biopharma entity post-Haleon demerger, with specialty medicines and vaccines now dominating its portfolio and driving significant growth and profitability.
• Strong Financial Momentum and Upgraded Outlook: The company reported robust Q2 2025 results, with group sales up 6% and core EPS growing 15% to 46.5p, leading to an upgraded full-year 2025 guidance towards the top end of its ranges for sales, operating profit, and EPS.
• Deep and Differentiated Pipeline: GSK boasts 14 "scale opportunities" in its pipeline, each with over £2 billion peak-year sales potential, including innovative long-acting HIV treatments, advanced oncology ADCs, and ultra-long-acting respiratory biologics, underpinned by significant R&D investment.
• Technological Edge in Key Therapeutic Areas: Differentiated technologies in long-acting injectables for HIV, ultra-long-acting IL-5 antagonists for respiratory diseases, and novel Antibody-Drug Conjugates (ADCs) in oncology provide a competitive moat and address high unmet medical needs.
• Commitment to Shareholder Returns: Bolstered by a strong balance sheet and improving cash flow, GSK is executing a £2 billion share buyback program and maintaining a progressive dividend policy, signaling confidence in its sustained financial performance.

GSK's Biopharma Renaissance: A Specialty-Driven Growth Story

GSK plc (NYSE:GLAXF), a company with roots tracing back to 1715, has undergone a profound transformation, shedding its consumer healthcare division (Haleon (HLN)) to emerge as a dedicated biopharma powerhouse. This strategic pivot, which generated £2.3 billion from the Haleon demerger, has enabled a sharp focus on innovation in specialty medicines and vaccines, fundamentally reshaping its portfolio and pipeline. The company's overarching strategy centers on delivering sustainable long-term growth through "Innovation, Performance, and Trust," with capital allocation prioritized towards high-growth areas. This renewed focus is now yielding tangible results, positioning GSK for sustained profitable growth through the decade and beyond.

The global pharmaceutical landscape is intensely competitive, characterized by high R&D costs, stringent regulations, and the constant need for innovation. GSK operates within this dynamic environment, competing directly with industry giants such as Pfizer Inc. (PFE), Johnson & Johnson (JNJ), Merck & Co., Inc. (MRK), and Novartis AG (NVS). While these rivals often exhibit strong innovation speed and broad market penetration, GSK carves out its niche through a diversified portfolio and strategic partnerships. The company's competitive advantages lie in its strong brand recognition, extensive R&D pipeline, and global distribution channels. These strengths allow GSK to maintain pricing power and foster customer loyalty, particularly in its specialized segments. However, GSK faces vulnerabilities, including potential over-reliance on partnerships and exposure to patent expirations, which could impact its cost structure and market share against more focused rivals.

Technological Differentiation and Innovation: Fueling Future Growth

GSK's investment thesis is significantly bolstered by its differentiated technological platforms and a robust pipeline designed to address high unmet medical needs. The company's R&D strategy, prioritizing Respiratory, Immunology & Inflammation (RI&I), Oncology, HIV, and Infectious Diseases, is delivering a new wave of innovative medicines and vaccines.

In HIV, GSK holds a leadership position in long-acting injectables, offering a "10-year head start" in this transformative treatment modality. Its flagship products, Cabenuva and Apretude, exemplify this. Cabenuva, the first and only approved complete long-acting injectable regimen for HIV treatment, now benefits over 90,000 patients globally. A Phase IIIb study (Volition) demonstrated that nearly 90% of newly diagnosed individuals chose to switch to Cabenuva from daily pills after achieving viral suppression, highlighting strong patient preference. Apretude, for HIV prevention, boasts over 99% effectiveness with more than three years of real-world data. The pipeline extends this leadership with a 4-monthly (Q4M) PrEP trial, expected to read out in H2 2026 for a H1 2027 launch, and a pivotal study for Q4M treatment commencing in H2 2025. Further out, twice-yearly (Q6M) injectables for both treatment and PrEP are on track for dosing regimen confirmation in 2026, with filing and launch anticipated between 2028 and 2030. A third-generation INSTI, VH184, shows the "best resistance profile seen to date" and has the potential to form the backbone of next-generation HIV treatment regimens with IP cover extending through at least the end of the next decade. This focus on long-acting options significantly improves patient adherence and convenience, creating a strong competitive moat against daily oral regimens and even newer weekly oral competitors, which may face challenges with patient preference and drug-drug interactions.

In Respiratory, Immunology & Inflammation (RI&I), GSK is strategically positioned to become an "indisputable leader" in COPD medicines. Nucala, an anti-IL-5 biologic, received FDA approval for COPD in May 2025, offering a key differentiator with its ability to treat a wide spectrum of patients with a blood eosinophil count starting at 150 cells per microliter. Crucially, Nucala is the only medicine to demonstrate a 35% reduction in hospitalizations from severe exacerbations in COPD, a significant benefit given that 70% of COPD-related costs are due to hospitalizations. Depemokimab, GSK's novel ultra-long-acting IL-5 antagonist, has been filed for severe asthma and chronic rhinosinusitis with nasal polyps, with an FDA decision expected by December 2025. Positive results from the AGILE continuation study underscore its sustained efficacy and safety over two years, with the SWIFT studies demonstrating a 72% reduction in exacerbations requiring hospitalization for patients receiving depemokimab. Market research indicates strong physician interest, with 86% of pulmonologists believing depemokimab could become a new standard of care. GSK's comprehensive portfolio, including IL-5, IL-33, and TSLP mechanisms, along with a new PDE3/4 inhibitor from a collaboration with Hengrui, aims to subsegment and treat the enormous burden of COPD, affecting over 300 million people globally.

Oncology is another area of accelerated investment and innovation. Blenrep, a novel Antibody-Drug Conjugate (ADC) for multiple myeloma, received regulatory approvals across Europe, Japan, Canada, the U.K., and Switzerland. Despite an extended U.S. FDA PDUFA date to October 23, 2025, GSK remains confident in its potential. The DREAMM-7 study demonstrated a statistically significant and clinically meaningful 42% reduction in the risk of death, with a projected overall survival benefit of 33 months compared to standard of care. Its 30-minute infusion in a community setting is a key advantage, as 70% of multiple myeloma patients are treated in this environment, offering a less burdensome alternative to complex CAR-T therapies or biospecifics with their associated infection risks. GSK is also prioritizing its broader ADC portfolio, including GSK-227 (targeting B7H3) which has received two breakthrough designations from the FDA for small-cell lung cancer and osteosarcoma, with early combination data suggesting potential for a chemo-free regimen. Pivotal studies for GSK-227 and GSK-584 (targeting B7H4) are slated to begin before year-end 2025 and early 2026, respectively. The acquisition of IDRx-42 (now GSK-981), a highly selective KIT inhibitor for gastrointestinal stromal tumors (GIST), further strengthens this pipeline, demonstrating activity against all key primary and secondary KIT mutations.

In Infectious Diseases, recent FDA approvals include Penmenvy, a pentavalent meningococcal vaccine offering broader strain coverage, and Blujepa, the first new class of antibiotic in over 30 years for uncomplicated urinary tract infections. The Phase III trial for tebipenem in complicated UTIs was stopped early for efficacy, highlighting further potential in this area. GSK is also exploring Shingrix's potential beyond shingles, including its protective effect in dementia, through large-scale linkage studies.

Financial Performance and Operational Discipline

GSK's strategic shift is translating into robust financial performance. For Q2 2025, the company reported group sales of £8.0 billion, up 6% at constant exchange rates (CER), with core operating profit increasing 12% and core earnings per share (EPS) growing 15% to 46.5p. This strong performance was primarily driven by its Specialty Medicines segment, which saw sales rise 15% to £3.3 billion, and Vaccines, which grew 9% to £2.1 billion. The Respiratory, Immunology & Inflammation portfolio contributed £1.0 billion in sales (up 10%), Oncology sales reached £0.5 billion (up 42%), and HIV sales were £1.9 billion (up 12%) in Q2 2025.

The company's profitability metrics reflect this positive trend. The core operating margin improved by 180 basis points in Q2 2025, benefiting from a strong focus on selling, general, and administrative (SG&A) expenses and a 70% increase in royalties due to an IP settlement. For the full year 2024, sales grew 8% to over £31 billion, with core operating profit up 13% and core EPS up 12%. The gross profit margin for the latest twelve months (TTM) stands at 71.69%, with an operating profit margin of 17.22% and a net profit margin of 10.82%.

Cash generation remains a key strength, providing flexibility for investment and shareholder returns. Cash generated from operations (CGFO) reached £3.9 billion in the first half of 2025, an improvement of over £1 billion, keeping the company on track to generate more than £10 billion in CGFO by 2026. Free cash flow also improved by £1.3 billion in the first half of 2025. GSK's net debt to core EBITDA remains broadly aligned with the previous year, underscoring a healthy balance sheet.

Outlook, Guidance, and Strategic Initiatives

GSK is highly confident in its future trajectory, now expecting to deliver towards the top end of its financial guidance for 2025, which projects sales growth of 3% to 5% and core operating profit and EPS growth of 6% to 8%. This optimism is fueled by the accelerating momentum in its Specialty Medicines business, for which the full-year 2025 guidance has been increased to low teens percentage growth. HIV guidance has also been adjusted upwards to mid- to high single-digit percentage growth. Even the Vaccines segment, which faced headwinds in early 2025, has seen its outlook improved to decline low single digit to stable for the full year.

The company's long-term vision is equally ambitious, with an outlook for sales to exceed £40 billion by 2031, an increase from previous estimates. Specialty Medicines are expected to drive this growth, accounting for well over 50% of total sales by 2031, up from approximately 40% today. This outlook is supported by a robust pipeline, with 14 "scale opportunities" expected to launch before 2031, each with peak-year sales potential above £2 billion. GSK anticipates 15 more Phase III readouts through 2025 and 2026, following a record 13 positive Phase III readouts in 2024.

Four pivotal studies are planned to commence in the second half of 2025, including for the B7H3 ADC in small-cell lung cancer, IDRx-42 in GIST, efimosfermin in MASH, and a 4-monthly long-acting injectable HIV treatment regimen.

GSK's capital allocation strategy prioritizes investment in growth, with significant resources directed towards R&D and targeted business development. The company plans to invest tens of billions of dollars in U.S. manufacturing over the next five years, including a new $1.2 billion biologics flex factory in Pennsylvania, to optimize its supply chain and scale capacity for new modalities. This investment also aims to mitigate potential tariff pressures. In addition to growth investments, GSK is committed to enhancing shareholder returns, having declared a Q2 2025 dividend of 16p and expecting a total of 64p for the full year 2025. The company has also initiated a £2 billion share buyback program, with over £800 million completed in the first half of 2025, demonstrating confidence in its valuation and future prospects.

Risks and Challenges

Despite the positive momentum, GSK faces several risks. The U.S. Inflation Reduction Act (IRA) is anticipated to be a £400 million to £500 million revenue headwind in 2025, with £150 million to £200 million impacting the HIV business. While GSK has identified mitigation strategies, the full impact and evolving policy landscape remain factors to monitor. The extended FDA review period for Blenrep, with a new PDUFA date of October 23, 2025, introduces some uncertainty, though the company remains in constructive discussions with the agency and has secured approvals in other major markets. Furthermore, the Zantac litigation settlement will result in approximately £1.1 billion in cash outflows in the second half of 2025.

The vaccines market presents its own set of challenges, including evolving ACIP recommendations in the U.S., a cautious macro environment in China, and competition. While GSK maintains long-term confidence in its best-in-class vaccines like Arexvy and Shingrix, near-term growth may be limited by these factors. However, the company's focus on international expansion and the potential for future revaccination and cohort expansion recommendations are expected to drive significant growth in the medium to long term.

Conclusion

GSK is in the midst of a compelling biopharma renaissance, driven by a focused strategy, a robust and differentiated pipeline, and disciplined financial management. The company's pivot towards specialty medicines and vaccines, underpinned by significant R&D investment and strategic acquisitions, is translating into strong financial performance and an increasingly optimistic long-term outlook. With Q2 2025 results demonstrating accelerated growth in its key segments and an upgraded full-year guidance, GSK is executing on its commitment to deliver consistent sales growth, operating leverage, and enhanced shareholder returns.

The technological advantages in long-acting HIV treatments, ultra-long-acting respiratory biologics, and novel oncology ADCs provide a strong competitive foundation, addressing critical unmet needs and positioning GSK for leadership in these therapeutic areas. While macroeconomic uncertainties, regulatory hurdles, and competitive pressures remain, GSK's proactive mitigation strategies, resilient supply chain, and continued investment in innovation underscore its potential to generate substantial value for patients and shareholders. The company's confidence, reflected in its £40 billion-plus sales outlook by 2031 and ongoing share buyback program, suggests a compelling investment narrative built on scientific leadership and strategic execution.