Analysis-GSK offers few clues about plans to replenish the medicine cabinet

Written by Natalie Grover and Maggie Vick

LONDON (Reuters) – Emma Walmsley, chief executive of GlaxoSmithKline, on Wednesday made replenishing the company’s pipeline of vaccines and therapeutics her first priority.

But analysts were disappointed that she did not provide more details about how she and her management team plan to find the company’s next block of drugs.

The existing pipeline will maintain growth through the end of this decade and beyond, Walmsley said, after the world’s largest vaccine maker reported stronger-than-expected fourth-quarter results.

But analysts say there isn’t enough in the medicine cabinet to keep the momentum going beyond the next few years.

Investors were especially eager to hear about the pipeline’s strategy after GKS spun off Haleon, its consumer health products company that makes Sensodyne toothpaste and other staples last July, freeing up money to supplement its drug pipeline.

GSK has largely missed out on the lucrative market for COVID-19 vaccines, but it has had a string of strong quarters after years of underperforming its peers.

Fourth-quarter results were boosted by sales of HIV drugs and the shingles vaccine, Shingrix.

But after an early rally, GSK shares in London’s FTSE 100 closed down 0.2%.

“We didn’t learn much new today in terms of their efforts to expand the pipeline,” said Emily Field, an analyst at Barclays.

Losing patent protection by 2027 for dolutegravir, the compound that forms part of GSK’s four HIV treatments, is a particular concern as this puts more than £5 billion ($6.2 billion) in sales at risk, Sebastian Skeet, analyst Healthcare at Third Bridge Research Corporation.

Among a few possibilities, GSK is relying primarily on its vaccine targeted against respiratory syncytial virus (RSV), which causes thousands of hospitalizations and deaths each year, to at least partially offset that loss.

It has been submitted for regulatory review in the United States, the European Union and Japan.

Skate told Reuters that with rivals Pfizer and Moderna vying for a slice of the estimated $10 billion market, some analysts speculate that GlaxoSmithKline could end up with only a portion of that.

“The implication of that is that there is still cause for compensation,” he said.

The company has announced some acquisitions, including a deal to buy US-based Sierra Oncology in 2022, but it has cut a number of programs from its pipeline, including abandoning an agreement focused on cancer and the field of cell and gene therapy altogether.

GSK has also suffered setbacks in its marketed cancer drug portfolio in recent months. Meanwhile, analysts say Shingrix’s market will eventually become saturated, limiting the company’s growth prospects.

Research and development spending

GSK’s R&D spending has long lagged its peers, something activist investor Elliott highlighted in a 2021 letter to pressure the company to make sweeping changes.

Andrew McConaghy, chief healthcare analyst at Citeline, said the company is starting to close the gap somewhat, spending just over 5 billion pounds ($6.2 billion) on research and development in 2022, but is still behind rivals Roche and AstraZeneca. and Pfizer.

GSK’s chief scientists say they are working to double their R&D productivity from the industry standard of 10% to 20%, or taking 2 in 10 drugs all the way from early trials to market, with the help of technologies such as artificial intelligence.

Some investors and industry experts say there is still time for the company to turn around its drug pipeline.

Lucy Coates, chief investment officer at JM Finn Wealth Management, which owns shares of GSK, is hopeful the company will eventually offer a streamlined, specialized suite of blockbuster drugs.

But until that happens, the stock may remain under pressure.

“There’s a little bit of clarity around that for investors at this point,” she said.

($1 = 0.8107 pounds)

(Reporting by Natalie Grover and Maggie Vick in London. Editing by Jane Merriman)

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