Analysis-GSK gives few clues on plans to replenish medicine cabinet

Natalie Grover and Maggie Fick

LONDON (Reuters) – GSK Chief Executive Emma Walmsley on Wednesday made replenishing the drugmaker’s range of vaccines and therapies her number one priority.

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

The current pipeline will sustain growth through the end of the decade and beyond, Walmsley said on a call 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 sustain the momentum even beyond the next few years.

Investors were particularly interested to hear about the pipeline strategy after GKS last July spun off Haleon, its consumer health products business, which makes Sensodyne toothpaste and other core products, providing cash to replenish its drug pipeline.

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

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

But after an early surge, GSK shares on London’s blue-chip FTSE 100 fell 0.2%.

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

The loss of patent protection until 2027 for dolutegravir, a compound that forms part of four GSK HIV treatments, is of particular concern as it puts more than 5 billion pounds ($6.2 billion) of sales at risk, said Sebastian Skeet, a health analyst in the research firm Treči most.

Among a handful of potential clients, GSK is primarily relying on its vaccine targeting 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.

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But with rivals Pfizer and Moderna also vying for a share of the estimated $10 billion market, some analysts expect GSK could only get a fraction of that, Skeet told Reuters.

“The implication, then, is that there is still a basis for compensation,” he said.

The company has announced some acquisitions, including a deal to buy US-based Sierra Oncology in 2022, but has dropped a handful of programs from its plan, including exiting a pact focused on cancer and exiting the cell and gene therapy field altogether.

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


GSK’s R&D spending has long lagged its peers, as activist investor Elliott pointed out in a 2021 letter pressuring the company to make sweeping changes.

The company has started to close that gap, spending just over 5 billion pounds ($6.2 billion) on research and development in 2022, but still lags behind rivals Roche, AstraZeneca and Pfizer, said Andrew McConaughey, senior health analyst in Citeline.

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GSK’s top scientists say they are working to double 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 like artificial intelligence.

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

Luci Coutts, chief investment officer at wealth management firm JM Finn, which holds GSK shares, said it was hoped the company would eventually deliver a modernized and specialized portfolio of successful drugs.

But until that happens, stocks may remain under pressure.

“There’s little visibility on that for investors at this stage,” she said.

($1 = £0.8107)

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


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