Specialist
Former SVP at GlaxoSmithKline plc
Agenda
- GlaxoSmithKline's (LON: GSK) pipeline recovery prior to 2022 consumer health separation, M&A appetite and potential bolt-on acquisitions to fill the gap
- Vaccines and Shingrix recovery
- GSK's Blenrep launch and uptake expectations, impact of Akebia’s vadadustat trial results on daprodustat, and expectations for TGF-beta partnership with Merck KGaA
Questions
1.
Looking at the recent results, GlaxoSmithKline maintained full year guidance, with an EBIT beat that can be partly explained by lower SG&A and R&D costs. Q3 2020 R&D spend was low, in part due to trial delays and perhaps due to relatively slim number of programmes. What are your thoughts on how GSK has managed the R&D spend in Q3, and how do you see this expense changing in future quarters?
2.
GSK has guided mid-single-digit increase in Q4 2020 R&D spend. What does this tell us about the cadence of pipeline catalysts in the near term?
3.
Are Dreamm studies 4, 5, 6 and 7 going to kick off in Q4 2020, or is that more of a 2021 catalyst? What should we expect for R&D spend and the impact on profitability in Q4?
4.
Do you expect a second wave of coronavirus across Europe and the US to change the cost of these trials in subsequent quarters? How do you expect that USD 20m trial cost per month to change?
5.
What are your expectations for R&D spend in 2021? Consensus expectation is 14.4% of revenue, implying a 9% increase from Q3 spend. Is that roughly in line with your expectations or do you think it’s likely to be higher?
6.
How do you think GSK’s CEO Emma Walmsley, its President of R&D Hal Barron and the rest of the team are approaching capital allocation across pharmaceutical vs vaccine R&D? Looking at the vaccine pipeline for example, Covid-19 aside, the RSV [respiratory syncytial virus] programmes looks like it holds promise and has the potential to hit the heights of Shingrix. Coupled with the difficulties on the pharma side, could we see a potential shift towards vaccines here for GSK?
7.
Do you think GSK is shackled by the current dividend structure, especially as it looks to reinvest into the pipeline? Is the dividend policy sustainable?
8.
You mentioned that the consumer healthcare and pharma companies could hypothetically target different investor bases. What do you mean by that?
9.
Everyone is talking about the need for pipeline recovery by 2022, as this is the projected date the CHC business will be spun out. In practice however, is 2022 the watershed moment, or does GSK have a bit more time to build out the pipeline, given there are no major pharma patent expiries until 2028. I believe these will be for dolutegravir in HIV and the Ellipta franchise in respiratory.
10.
How has GSK’s pipeline matured since we spoke about this eight months ago [see GlaxoSmithKline – Part 1 – Corporate Strategy Update & Oncology Re-entry – 12 February 2020]?
11.
It seems GSK’s pipeline in respiratory now essentially consists of a single experimental asset, an IL-5 inhibitor for asthma, which completed the phase 1 trial in 2019, but we’ve barely heard about it since. Do you think this is going to be an area for growth?
12.
How have the development timelines and the speed at which GSK can bring assets to market improved? Blenrep has been fairly fast to market, and the ICOS agonist has had a pretty speedy development timeline. Is this unique to those two assets, or do you expect that kind of speed across the board for GSK?
13.
What shape do you think GSK’s pipeline will take by 2022, assuming no M&A? Is it robust enough to operate as a standalone pharma company, or is there need for some inorganic contribution?
14.
Why is GSK behind in the M&A shopping spree that its peer group has been on recently? As a second part to that question, how much firepower does it have on hand for a potential acquisition or bolt-on?
15.
Shingrix sales missed consensus sales by 19% in Q3 2020. Some sell-side shops were up to 27% off. What was the street not factoring in their forecasts? Why the miss?
16.
If an aggressive second wave of coronavirus leads to local lockdowns and patients being unable to go to pharmacies what does that mean for GSK’s Q4 results? What level of Shingrix sales are required for GSK to sustain its EPS [earnings per share] guidance for the year?
17.
You mentioned US prescription rates only returned to 2019 levels by the end of Q3 2020, so perhaps it’s taking longer than some may have expected. Why do you think that is? What does that tell us about the likelihood of an aggressive dip in Q4 2020?
18.
Blenrep was recently launched in the US and Europe, with revenue so far hitting USD 8m. What are your uptake expectations? Factors worth considering would be the black-box warning for ocular toxicity and coronavirus impacting the ability to ramp up.
19.
Blenrep is facing stiff competition in CAR-Ts from players such as J&J and Bluebird Bio but as we have discussed in a previous interview, but it's clear that coronavirus affects all pipeline programmes. Should we be more optimistic for Blenrep uptake than we were previously, given the potential delays to Car-T?
20.
Moving onto the HIF inhibitors in CKD, what are the cross-reads from the negative trial results of Akebia’s vadadustat on GSK’s daprodustat? Is this the harbinger of bad news, or one less competitor to deal with?
21.
To add some colour here, we saw the safety issues with Akebia’s vadadustat coming out of the phase 3 Pro2tect in non-dialysis-dependent patients with anaemia due to chronic kidney disease. These were not expected, due to the existing approval in Japan in broader kidney disease-related anaemia, and the Inno2vate dialysis data was positive. What do you think led to those safety issues with vadadustat? Was this a trial design problem?
22.
Even with vadadustat out the way, do you think roxadustat is still likely to take an early monopoly in the non-dialysis-dependent indication, so this doesn’t change the calculus for daprodustat’s commercial prospects?
23.
An interim analysis has taken place for Merck’s bintrafusp alfa, so the TGF-beta. The study will continue as planned, but recruitment has been closed to 300 subjects, despite a protocol amendment earlier in March expanding the study to 584 patients. Clearly this indicates that the trial isn’t an outright failure, as it is still continuing, but does the fact that the trial has not been expanded to these 584 patients indicate that the results may be disappointing? Should we interpret this as a negative?
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