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Will RSV vaccine race boost the GSK share price?

Respiratory syncytial virus (RSV) causes thousands of deaths each year. To date, there is no treatment for it, but now vaccines developed by GSK and Pfizer are close to coming to market, with final decisions by the US FDA expected for May.

- FDA advisory committee votes to allow the use of GSK’s RSV vaccine on adults aged 60 and older.

- A number of regulatory decisions and clinical trial read-outs are expected in 2023.

- Horizon Kinetics launched a medical ETF in January focused on drug development and cancer.

The race to develop a vaccine for respiratory syncytial virus (RSV) is in its home straight, and could give GSK [GSK.L] a major boost.

Last week, an advisory committee for the US Food and Drug Administration (FDA) recommended the health body approve the use of two vaccines—one from GSK and another from fellow pharma giant Pfizer [PFE].

The committee unanimously agreed that trial data supported the GSK candidate’s effectiveness for use on adults aged 60 and older. The committee also agreed—by 10 votes to two—that the data support the safety of the vaccine, although it acknowledged there were risks. The trial resulted in one case of Guillain-Barré syndrome and two cases of acute disseminated encephalomyelitis, a rare and serious neurological disorder.

The FDA will not make its decision on GSK’s RSV shot until 3 May, so last week’s news did little to move the share price, which is down 1% year-to-date.

RSV vaccine to boost top line

It’s too early to conclude which of the two RSV vaccines will come out on top, but GSK is confident that its candidate will win approval in the US as well as in the EU and Japan this year. The vaccine will help strengthen the company’s portfolio and pipeline and contribute meaningfully to overall revenue.

“This momentum, together with further targeted business development, means GSK will also be in a strong position to deliver growth from 2026 onwards,” commented GSK CEO Emma Walmsley in the fourth quarter (Q4) 2022 earnings release last month.

Evan Wang, an analyst at Guggenheim Securities, has forecast that peak annual sales of the RSV vaccine could reach $2.8bn, according to Reuters. To put this into context, GSK’s full-year revenue for 2022 was £29.3bn, with its vaccines business contributing £7.9bn.

Pfizer’s vaccine candidate is also expected to receive approval, with the FDA set to make a decision on 31 May. If for some reason it doesn’t, or if a decision is delayed, this could give GSK a competitive advantage.

HIV patent protection challenges

While there’s plenty of talk about the RSV vaccine, GSK is awaiting regulatory decisions on a number of other drugs. Several late-stage clinical trial read-outs are slated for later this year, including its meningitis vaccine candidate, MenABCWY, and drugs Blenrep and Zejula.

The shingles vaccine Shingrix is the company’s blockbuster vaccine, bringing in £3bn in 2022, a year-over-year sales growth of 72%. The vaccine was launched in nine markets last year, taking the total number of countries where it is available to 26.

While future approvals will only bolster GSK’s top line, there are challenges ahead. The main one in the near-term is litigation facing Zantac over claims that the heartburn drug causes cancer. The first court trial in California was postponed by five months at the end of February.

There could also be some material risks from GSK’s HIV drugs losing their patent protection at the end of the decade. Sales of HIV treatments came to £5.7bn in 2022, making up just under one-fifth of total revenue.

“They don’t really have a pharma asset (outside of HIV) at the moment that holds the business together… They need to go out and find something, at this point it’s not clear where they go,” UBS analyst Michael Leuchten told Reuters following the earnings report.

Funds in focus: Horizon Kinetics Medical ETF

GSK was named in February by Morningstar as one of the top 10 most undervalued stocks to invest in during a recession. “Patents, economies of scale, and a powerful distribution network support the drugmaker’s wide moat rating,” according to director of healthcare equity research Damien Conover.

For investors looking for broader exposure to the pharma industry, the VanEck Pharmaceutical ETF [PPH] has allocated GSK 4.30% of its portfolio as of 3 March. The fund is down 1.9% year-to-date and down 2.6% in the past month. 

As of 7 March, GSK makes up 2.56% of the Pacer BioThreat Strategy ETF [VIRS]. The fund is up 0.5% year-to-date and down 4.2% in the past month.

The Horizon Kinetics Medical ETF [MEDX] was launched earlier this year, with a particular focus on drug development and cancer. GSK has been allocated 2.19% of the portfolio as of 7 March. The fund is down 3.6% since its launch.

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