GlaxoSmithKline's 'serial disappointments' cast doubt on its growth plans: analyst

GlaxoSmithKline GSK House in Brentford, UK
GlaxoSmithKline promised more than 10 potential blockbusters by 2026, a goal that may be challenging to reach, analysts said.

Between the failure of its late-stage cancer drug bintrafusp alfa in a key clinical trial and an unexpected inspection delay for another oncology hopeful, dostarlimab, GlaxoSmithKline is having a bad week, to say the least.

But some pharma analysts worry that those problems are more than just short-term blips. They raise questions about GSK’s dealmaking and cast doubt on its forecasts, they said.

SVB Leerink’s Geoffrey Porges went so far as to say GSK’s five-year roadmap, which Chief Scientific Officer Hal Barron, M.D., presented last week at the JPMorgan Healthcare Conference, may already be in jeopardy. That’s because Barron promised more than 10 potential blockbuster launches by 2026—two of which are bintrafusp alfa and dostarlimab.

“Notwithstanding GSK’s attractive valuation, these serial disappointments are becoming a major concern for GSK’s medium- and long-term outlook,” Porges said in a note to investors.

Three years ago, GSK CEO Emma Walmsley launched a major makeover that included forming a consumer joint venture with Pfizer—now in the process of being spun off into an independent company—and ramping up investments in its pharmaceutical portfolio. One of those investments was a €300 million up-front deal in 2019—worth $4.6 billion total—with Merck KGaA to develop bintrafusp alfa.

The immuno-oncology drug, which fuses a TGF-β trap with an anti-PD-L1 molecule, failed a trial comparing it to Merck & Co.’s blockbuster PD-1 inhibitor Keytruda in non-small cell lung cancer (NSCLC). An independent monitoring committee told GSK the trial is unlikely to meet its primary endpoint, prompting GSK and Merck KGaA to call a halt.

RELATED: GSK, German Merck's $4.2B bintrafusp alfa drug a bust, fails to beat king Keytruda in lung cancer

Bintrafusp is still in trials for biliary track cancer and cervical cancer, but a recent small trial in MSI-high tumors was disappointing, SVB Leerink's Porges said, raising doubts about the drug’s future. “Although the ‘new GSK’ does not have a long history, so far the company’s capital allocation process and results aren’t inspiring confidence,” the note said.

GSK was expecting the FDA to rule on its other near-term oncology hopeful, dostarlimab, by the end of last year. But COVID-19 travel restrictions prevented an inspection of the manufacturing facility, GSK said earlier this week, and that inspection still hasn’t been scheduled. Analysts are still expecting the FDA to clear the PD-1 blocker to treat MSI-high and microsatellite stable (MSS) endometrial cancer, and a decision is due in the first half of this year, the company said.

Vaccines are another key growth area for GSK, with 16 in the pipeline. But there have been some hiccups there, too. Sales of the company’s high-profile shingles vaccine, Shingrix, fell 25% in the third quarter of last year as Americans delayed the shot amid COVID-19 lockdowns. GSK’s vaccine unit posted the company’s biggest sales decline of 9%.

RELATED: GSK's vaccines—especially Shingrix—typically drive growth. Amid COVID-19, they're a drag

Credit Suisse analysts predicted another hurdle for Shingrix in the short term: The Centers for Disease Control issued guidance suggesting COVID-19 vaccines should not be given with other vaccines. That will “significantly limit” sales of Shingrix in the first half of 2021, Credit Suisse said in a note to investors.

Credit Suisse downgraded its rating of GSK to “underperform,” noting that the company is facing so many challenges it may need to cut its 2022 dividend by more than 35%. “With multiple near-term and strategic challenges we see limited upside,” Credit Suisse said.