In GSK’s first quarter after the Haleon consumer health spinoff, shingles vaccine Shingrix put up another record show. But while a cloud of Zantac lawsuits gathers over the company, CEO Emma Walmsley is maintaining GSK’s focus on the fundamental business.
Shingrix has completely recovered from a pandemic-related slowdown. In the third quarter, sales of the shot hit a new record, reaching £760 million ($874 million). The number beat the second quarter haul of £731 million and came 11% above Wall Street’s expectations.
A mix of factors contributed to Shingrix’s stellar performance, GSK said. These include a post-pandemic rebound, launches in new territories, increased demand in the U.S., favorable pricing and GSK’s commercial push outside the U.S., the company said.
Thanks to the strong sales, Walmsley, during a Wednesday call with reporters, reiterated GSK’s ambition to double Shingrix’s annual sales by 2026 versus 2020’s level.
Meanwhile, GSK recently offered new 10-year data for Shingrix, showing an efficacy above 80% during a follow-up period ranging between six and 10 years after immunization. The data set “a new gold standard of protection for shingles that is going to be very difficult for competitors to beat,” Walmsley said.
Overall, GSK’s third-quarter sales jumped 13% at constant currencies to £6.9 billion. Besides Shingrix, the company’s HIV franchise also notably contributed to the growth.
But as Walmsley touted GSK’s strong momentum and confidence in its ability to deliver growth after the consumer split, the growing Zantac product liability claims are weighing on the British pharma’s stock performance.
GSK currently counts about 77,000 claims spanning more than 4,000 cases across federal and state courts that allege the company’s Zantac caused cancer, CFO Iain Mackay told reporters during Wednesday’s press briefing. In preparation for the legal battle, GSK took a charge of £45 million in the third quarter, which Mackay said primarily reflects legal fees related to Zantac but not any approach toward a potential settlement.
GSK is still very early in the Zantac litigation; the majority of the cases haven’t even been vetted, Mackay said. In August, the plaintiff in the first Zantac trial moved for voluntary dismissal in an early win for GSK.
Now, GSK expects the first trial to start on Feb. 13, 2023, in California. The case will provide some insight for both the plaintiffs and GSK moving forward.
On the federal front, the claims are going through what’s known as Daubert hearings in front of District Judge Robin Rosenberg in Florida. The judge is deciding what expert evidence can be admitted into trial.
“The scientific consensus on this question is extremely clear,” Walmsley said during the press briefing. “And if you look at all of the research we’ve done over the last three years, the position of the FDA, the EMA 12 epidemiological studies that have been run, there is no reliable evidence of any causation between ranitidine and cancer, and so we will be vigorously defending our position on this.”
But as Wolfe Research analyst Tim Anderson suggested during a separate earnings call with investors, the uncertainty around the Zantac lawsuits means GSK might have to reserve money to resolve the legal liabilities. That could mean a temporary hold on dealmaking, especially mergers and acquisitions, Anderson argued.
For her part, Walmsley said GSK’s capital allocation strategy remains unchanged.
“I want to be absolutely, categorically clear,” Walmsley said during the investor call, “we will, as always planned, continue to pursue business development with agility, ambition and appropriate aggression and due discipline from a financial point of view. There is absolutely no change in our intention there.”
In two small transactions, GSK recently bought Sierra Oncology for $1.9 billion to gain FDA review-ready myelofibrosis candidate momelotinib, and it also acquired Affinivax for $2.1 billion upfront, hoping the latter’s multiple antigen-presenting system could yield a challenger to Pfizer’s blockbuster Prevnar franchise of pneumococcal vaccines.