GlaxoSmithKline: Q2 highlights and key takeaways

GlaxoSmithKline reported its 2017 second-quarter results on July 26, with a new strategy laid out by CEO Emma Walmsley overshadowing what was otherwise a robust set of financials…

New CEO – new strategy?

As we noted here – ViewPoints: GlaxoSmithKline – meet the new boss (same as the old boss or not?), key parts of the strategy laid out by Walmsley do not necessarily reflect well on her predecessor. There is much to fix in the pharma division, she suggested, highlighting both too many products in the R&D pipeline and development timelines that have continued to elongate since 2008. An area where improvement is critically needed concerns better alignment between GlaxoSmithKline's development and commercial functions, added R&D head Patrick Vallance. Walmsley noted that while the company had one of the industry's best track records in novel drug approvals over the past decade, it is forecast to generate lower average peak sales per these new launches through to 2022 versus any of its Big Pharma peers.

Furthering a trend seen at a number of other prominent pharma and biotech companies this past week, GlaxoSmithKline announced a cull of 30 preclinical and clinical assets (including the IL-6 MAb sirikumab, which is awaiting approval for rheumatoid arthritis and the GLP-1 agonist Tanzeum, which is marketed for type 2 diabetes). Eighty (80) percent of future investment will go into four therapeutic areas; respiratory and HIV, where the company has an existing presence, and oncology and immuno-inflammation, where the company hopes to establish a foothold in the coming years if clinical data for pipeline assets is positive. 

Analyst reaction

Some investors may be concerned at Walmsley's lack of experience in the pharmaceuticals sector (her background is consumer), noted Bernstein's Tim Anderson, while long-term shareholders will also be wary that promises to improve R&D productivity echo those made by the company over much of the last decade to little effect.

Describing the strategic update as "somewhat underwhelming," analysts at Barclays suggested "whilst we see plenty of merit in the strategic and tactical objectives outlined today, we are also looking for something more than perpetual divestments and cost-cutting. This is not the first time we have heard such objectives outlined and they will likely take some time to prove."

The oncology issue

GlaxoSmithKline's push in oncology will remain somewhat controversial given the decision to sell its marketed cancer drugs to Novartis in 2015 (irrespective of the scale this provided to the vaccine and consumer units and the company's repeated claims that it has retained significant talent in oncology R&D).

Focus will be on immuno-oncology and epigenetics, said Vallance, and the company played down the need for M&A, noting that a steady stream of candidates have advanced into the clinic since 2014. Walmsley did concede, however, that GlaxoSmithKline must wait for clinical data readouts to confirm whether there is an "anchor" asset around which a portfolio can be built.

Nearer-term growth drivers

Regarding its FDA-filed 'closed triple' therapy for chronic obstructive pulmonary disorder (COPD), Walmsley noted that a third of patients already receive treatment with ICS, LABA and LAMA therapy. Feedback from physicians has been positive and payer engagement has occurred much earlier, she added.

Asked whether the HIV market holds scope for true innovation, management suggested that prevention of emerging resistance and improvements in tolerability (given that HIV is now a chronic disease) are significant areas for opportunity.

To reduce side effects, GlaxoSmithKline is developing a number of doublet therapies both internally and with external partners, and hopes to secure US approval for Edurant (with Johnson & Johnson) by year-end. This strategy will be important with competition from Gilead Sciences set to intensify in the market for triplet combinations – ViewPoints: Gilead cements bictegravir’s ‘good enough’ profile but ViiV not conceding without a fight

Is the company concerned about resistance seen in a small investigator study of dolutegravir and lamivudine, one analyst asked. The patient in question was "chaotically non-adherent" to therapy, said management, who pointed to impressive data for the pairing recently presented at the IAS conference. Non-adherence is, of course an issue in the real-world setting, which cannot be ignored (one that GlaxoSmithKline is seeking to combat with longer-acting, injectable therapies) and will be a factor to watch as data from the Phase III GEMINI studies of dolutegravir and lamivudine read out next year .

In the vaccines business, management cited Shingrix's growth potential in relation to that of Merck & Co.'s Zostavax, which generates annual revenues of around $800 million, with approximately 80 percent of sales in the US market. GlaxoSmithKline plans a more globalised launch, which could be key in helping to offset Shingrix's two-dose regimen versus the single-dose administration of Zostavax, noted analysts.

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