Pharma giant GSK has delivered plenty of good news in recent months, from its acquisitions of smaller drug makers to positive clinical trial results. But, as the demerger of its consumer brands approaches, investors remain somewhat cautious.
The GlaxoSmithKline [GSK.L] share price continued its healthy trajectory after receiving US Food and Drug Administration (FDA) approval for its measles-busting drug Priorix.
The pharma giant revealed on 6 June that the FDA had given the thumbs up to Priorix for active immunisation for the prevention of measles, mumps and rubella in people aged one year and up.
The drug is currently licensed in more than 100 countries around the world, including all nations in Europe, Canada, Australia and New Zealand. To date, 800 million doses have been distributed.
“We’re proud to make Priorix available in the US for the first time, adding a choice for providers to help protect patients against these highly-contagious diseases and to further strengthen offerings in our paediatric vaccine portfolio,” said Judy Stewart, GSK’s senior vice president and head of US vaccines.
According to a press release issued by the company, in recent years more than 400,000 measles cases were confirmed in 2019, “reversing decades of progress toward measles elimination in many countries”.
The news sent the GSK share price 1.45% higher in the day following the announcement to close at 1,719.6p on 7 June. It now sits at 1,736.6p at the close on 13 June
More vaccine hopes for GSK
The share price was boosted further by a second announcement later that same week which revealed that GSK had recorded positive phase III trial data for its respiratory syncytial virus (RSV) vaccine candidate for adults aged 60 and up.
GSK said it was the first RSV vaccine candidate to show “statistically significant and clinically meaningful efficacy in adults agreed 60 years and above”.
"These data suggest our RSV vaccine candidate offers exceptional protection for older adults from the serious consequences of RSV infection,” said Dr Hal Barron, GSK’s chief scientific officer and president of R&D, said in a press release. “RSV remains one of the few major infectious diseases without a vaccine.”
Dr Barron added that the vaccine GSK is developing has “the potential to meaningfully impact the treatment of RSV and may reduce the 360,000 hospitalisations and more than 24,000 deaths worldwide each year”.
GSK’s share price surge
The GSK share price has had a strong 12 months after lagging behind rivals such as AstraZeneca, which were successful in producing a quick and effective Covid-19 vaccine.
The GSK share price has climbed 22% from this time last year, when it closed at 1,407.4p. It stood at around 1,800p just before the pandemic hit.
Aside from its drugs successes there has been much more clarity for investors around the demerger of its consumer arm, known as Haleon, which will take place on July 18. As part of the move, drug rival Pfizer [PFE] is also expected to sell off its 32% stake in Haleon. It has a lock-up period until November.
Haleon, which will continue making consumer staples like Sensodyne toothpaste, is expected to generate revenue growth of 4–6% per year.
We also roughly know its value given that GSK recently turned down a $50bn bid for the division from Unilever.
GSK is getting prepared for the split and those lost revenues by snapping up innovative vaccine firms like Affinivax for $2.1bn. This follows its recent acquisition of Sierra Oncology for $1.9bn. More deals are expected to follow.
How has GlaxoSmithKline been performing?
In its first-quarter results announced on 27 April, GSK reported a 36% leap in vaccine sales driven by strong sales of Shingrix, its shingles vaccine.
The firm said it expects to deliver sales growth in 2022 of 5–7% at CER and growth in adjusted operating profit of 12–14%.
“We have delivered strong first quarter results in this landmark year for GSK, as we separate consumer healthcare and start a new period of sustained growth,” Emma Walmsley, GSK’s CEO, said in a press release announcing the results. “Our results reflect further good momentum across specialty medicines and vaccines and continuing pipeline progress.”
There is some caution approaching the demerger and what that means for GSK going forward. Investors are also waiting on the next move from activist investor Elliott Management, which has called for a shake-up of the board, including bringing on more science-based experience and for Walmsley to re-apply for her job.
However, GSK has been aggressive in the M&A market and set itself strong sales forecasts for the coming year. “In 2022, Glaxo expects data readouts on multiple late-stage pipeline vaccines and medicines, which could be future growth drivers, including the RSV vaccine for older adults and several new potential specialty treatments for rheumatoid arthritis, cancer and hepatitis B,” analysts at Zacks Investment Research said.
Long term, the prognosis for GSK looks good. According to The Motley Fool, analysts forecast that the company will deliver 8.2% annual earnings growth through the next five years, which is above the industry average of 7.2%.