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Here's Why Glaxo (GSK) Steadily Stays Ahead of Its Industry

Zacks Equity Research

So far this year, GlaxoSmithKline plc’s GSK shares have outperformed the industry. The stock has risen 8.8% against a 1.4% decrease for its industry.

 

 

Meanwhile, estimates for 2019 have inched up 1.4% in the past 30 days.

Its successful product launches, increasing focus in the oncology area, and positive pipeline and regulatory updates have all contributed to this upside.

New Products’ Impressive Performance

In 2017, Glaxo received approvals for its three key new drugs, namely Shingrix vaccine for shingles, which enjoys preferential recommendation from ACIP; Trelegy Ellipta, which provides three medicines in a single inhaler to treat COPD and Juluca (dolutegravir and rilpivirine), the first two-drug regimen, once-daily, single pill for HIV. All three products did well in 2018 and during the first half of 2019, particularly Shingrix.

Juluca has been developed by Glaxo HIV-focused company ViiV Healthcare in partnership with Johnson & Johnson JNJ.

In fact, these new products coupled with the restructuring in the Consumer Health unit strengthened Glaxo’s competitive position.

In June 2018, Glaxo bought Novartis’ NVS 36.5% stake in their Consumer Healthcare joint venture (JV) for $13 billion (£9.2 billion). In December 2018, Glaxo and Pfizer PFE announced an agreement, stating that both will merge their consumer healthcare units into a new joint venture (JV). Glaxo owns a controlling stake of 68% in the JV.  The transaction closed on Aug 1, 2019.

Pipeline & Regulatory Successes

Glaxo has made significant progress with its late-stage pipeline. The company has had major positive data read-outs on multiple new medicines in HIV, oncology, immuno-inflammation and respiratory in 2019 so far with many other scheduled for the second half.

HIV is expected to be an important driver for Glaxo’s Pharma business going forward. It had some positive developments in its HIV pipeline. In April this year, Glaxo gained an FDA approval for Dovato, a single tablet regimen of Tivicay (dolutegravir) + lamivudine for treatment-naïve HIV patients. Meanwhile, the same was approved in the EU in July. The new HIV medicine is off to a strong start.

Glaxo also announced positive data from both the FLAIR and ATLAS studies this year, evaluating cabotegravir plus rilpivirine in a long-acting, once-monthly HIV formulation. Glaxo believes that this long-acting injectable HIV therapy will provide a highly differentiated treatment option for patients seeking a long-lasting therapy for HIV, thereby freeing them of the burden of daily oral therapy. The cabotegravir plus rilpivirine long-acting regimen was filed with the FDA and the European Commission with the former expected to convey its decision on the same come December.

Increasing Progress in Oncology

Glaxo has made a significant progress in its oncology pipeline recently and now has 16 assets in development, double from 8 as of July 2018. This has been achieved through advancement of internal programs as well as targeted business development including the January 2019 acquisition of Tesaro and the February global alliance with Merck KGaA (to co-develop bintrafusp alpha/M7824, a promising new oncology medicine).

Meanwhile, Glaxo now has a number of molecules with diverse mechanisms of action, offering an opportunity for many innovative cancer combinations. The company expects to launch three new cancer medicines in the next 18 months. Zejula, the ovarian cancer drug Glaxo acquired from the Tesaro buyout, was granted a priority review by the FDA in June for an expanded use in treatment of the late-stage ovarian cancer. The regulatory body is expected to give its decision on Oct 24. Meanwhile, another regulatory application seeking a nod for ovarian cancer in first-line maintenance setting is expected to be filed by 2019 end. The FDA approval for these expanded indications will make Zejula eligible to treat a larger patient population.

Conclusion

Glaxo has its share of challenges in the form of stiff competition, genericization and pricing pressure on key drugs in the Pharma segment. Particularly, pricing pressure and competitive dynamics are hampering sales of Glaxo’s respiratory products. Importantly, a generic version of its top-selling drug Advair has been launched, which is significantly eroding the drug’s sales. Also, competitive pressure on HIV drugs is on the rise. Nonetheless, higher sales of new products, pipeline success and accretive deals are expected to keep the stock afloat through the rest of the year.

Glaxo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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