GlaxoSmithKline (LON: GSK) shares were worth as much as 1,846p in January 2020. Then the covid-19 pandemic struck, and the FTSE 100 stalwart fell by 35% to 1,191p by February 2021.

But GSK shares have now recovered to 1,790p. And further rises could be imminent after today’s optimistic trading update.

GlaxoSmithKline share price: Q1 2022 results

Headline results were excellent for the pharmaceutical giant, as revenue rose by a significant 32% to £9.8 billion and operating profit increased by 65% to £2.8 billion. Meanwhile, cash flow from operations and free cash flow both increased by more than 100%, reflecting the weaker comparable period in 2021.

The revenue boost was underscored by a 98% increase derived from its speciality medicines department to £3.1 billion, as covid-19 drug Xevuday brought in £1.3 billion in sales.

The drug is clinically proven to work against the Omicron variant, but recent data implies it is ineffective against the BA.2 subvariant that is now dominant in the US. Accordingly, the Food and Drug Administration has pulled the treatment off the market in some states.

With the US the largest buyer of Xevuday, profits from the drug are likely to stall.

In better news, vaccine revenue rose by 36% to £1.7 billion, ‘driven primarily by Shingrix (Shingles vaccine) in the US and Europe reflecting strong performance and the benefit of a favourable comparator in Q1 2021.’ Moreover, GSK expects strong double-digit growth and record annual sales for the vaccine in 2022.

Third Bride analyst Sebastian Skeet noted that ‘key revenue driver Shingrix's performance was encouraging ... although recent data points to prescription levels still significantly below pre-pandemic volumes.’

CEO Emma Walmsley lauded Q1’s results as the beginning of a ‘landmark year for GSK,’ highlighting ‘further good momentum across specialty medicines and vaccines’ as well as ‘continuing pipeline progress.’

The CEO further highlighted the ‘very good momentum’ of its consumer healthcare unit, which saw sales grow by 14% in the quarter to £2.6 billion. Walmsley believes the business has ‘strong potential’ ahead of its proposed demerger to become Haleon in July.

Where next for GSK shares?

Full-year guidance remains unchanged despite a better-than-expected first quarter, suggesting GSK remains wary of the tightening monetary environment and wider economic distress. The FTSE 100 company expects sales growth of between 5-7% in 2022, with profits increasing by 12-14%.

And it's put aside an unspecified level of funds to deal with the fallout of the Russia-Ukraine crisis. While the region accounts for less than 1% of total sales, GSK is not immune to the continuing supply chain crunch.

But it is not all business as usual at Glaxo. As Walmsley notes, 2022 is set to be a landmark year. The behemoth rejected a £50 billion bid from Unilever for its increasingly profitable consumer unit in December. Bids from other parties are not impossible.

And it’s under intense pressure from activist investor Elliott to increase the pipeline activity highlighted by Walmsley. Elliott has previously criticised GSK for ‘years of under-management’ and openly questioned the CEO’s credentials.

Earlier this month, GSK agreed to buy Sierra Oncology for £1.5 billion to access momelotinib, a drug being tested on anaemic patients with myelofibrosis. GSK believes the drug has ‘significant growth potential’ with potential sales of £1.3 billion per year.

But GSK has already experienced several unfortunate trial setbacks on fellow cancer drugs bintrafusp alfa and feladilimab, which it had also predicted could generate billions in revenue. Of course, drug discovery is a notoriously risky business.

This makes the spin-off of its consumer healthcare division into Haleon all the more interesting. The move will generate £7 billion in cash for GSK, which it could use to make further acquisitions. In forward guidance, it highlighted increased ‘targeted investment in R&D, to build on and invest behind our top-line momentum for key growth drivers’ as strategic priorities.

And the pressure to develop new drugs is on. By 2027, GSK will lose patent exclusivity on its HIV drug dolutegravir, which currently brings in £3 billion annually.

But revenue is rising, and momentum is on the company’s side. GlaxoSmithKline shareholders may be happy to take on a little extra risk in pursuit of higher rewards.

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*Based on revenue excluding FX (published financial statements, June 2020).