GlaxoSmithKline (GSK) has hit some rough patches lately, but some analysts are concerned the nearly $100-billion pharmaceutical giant could be coming off the rails completely.
FiercePharma recently reported that SVB Leerink's Geoffrey Porges is one of them. The analyst said the company's five-year plan, as outlined by Chief Scientific Officer Hal Barron, M.D. at the recent JPMorgan (JPM) Healthcare Conference, may already be in trouble. That's because two of the 10 potential blockbusters the company said it would launch by 2026 have run into problems.
The British company's late-stage cancer drug bintrafusp alfa fell short in a key clinical trial and its promising oncology treatment dostarlimab suffered an unexpected inspection delay.
The company still has high hopes for bintrafusp, which is being tested for biliary tract and cervical cancer, but a recent small trial was discouraging, Porges said, perhaps jeopardizing 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," he wrote in a note.
Covid-19 has also taken over the Food and Drug Administration's priorities, including its plans to inspect the plant where dostarlimab is going to be made. That put a kibosh on the company's hopes to have the oncology medication greenlighted by the end of last year. Although the inspection still hasn't been put on the calendar, analysts think the FDA will okay dortarlimab in the first half of the year.
Glaxo has high hopes for its vaccine business with 16 shots in the pipeline, but the company has had some issues here too. For example, sales of its prominent shingles vaccine Shingrix dropped 25% in the third quarter due to Covid postponements. That contributed to a 9% shortfall in Glaxo's overall vaccine business, according to FiercePharma.
Shingrix is likely to run into additional problems because the Centers for Disease Control issued guidance suggesting Covid vaccines should not be given with others. That will "significantly limit" sales of Shingrix in the first half of 2021, Credit Suisse said in a note to investors.
Based on the serious roadblocks facing Glaxo, Credit Suisse downgraded its rating of the company to "underperform," suggesting it may have to slice its dividend by 35%. The company's current payout of $2.05 yields a healthy 5.39%.
Overall, Credit Suisse sees limited upside for Glaxo. That has to further discourage investors, who have seen the value of their shares plunge 18% in the past year and stagnate over the past five. During the same five-year period, the iShares U.S. Pharmaceuticals ETF (IHE) gained 35%.
"With multiple near-term and strategic challenges we see limited upside," Credit Suisse said, and I am inclined to agree.
Disclosure: The author holds no position in any of the stocks mentioned in this article
Read more here:
- AbbVie, Roche, Glaxo Are Experts at Product Launches
- Beam, SpringWorks Biggest Gainers on BioSpace List
- Sana Biotech Market Cap Expected to Top $10 Billion Post-IPO
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
