Year-end earnings show turbulent times for Hal Barron's GlaxoSmithKline turnaround
Hal Barron and Emma Walmsley’s big GlaxoSmithKline pivot may ultimately prove successful, delivering blockbusters in cancer, auto-immune conditions and infectious disease. But the path to get there is already looking rocky.
GSK announced their year-end earnings Wednesday morning, revealing that they had cut two more pipeline candidates after they failed in early stage trials and disappointing investors with news that profits had fallen and earnings per share would decline by mid to high single digits.
GSK’s stock $GSK fell 4% Wednesday, from $37.57 to $35.94.
The lower profit margins reflect the British pharma’s increased R&D spending — something analysts and investors sometimes reward when it pays off. But Barron has seen a slate of R&D setbacks in just the past few weeks. In January, they announced that the centerpiece of a $4 billion immuno-oncology partnership with Merck KGaA failed in a Phase III lung cancer trial. Two days later, they scrapped an ulcerative colitis study for LAG-3 drug after it failed an interim review.
Meanwhile, their high-profile Covid-19 partnership with Sanofi faced a major setback that knocked the pair out of the cast of vaccine frontrunners, while another vaccine biotech, Clover, sloughed off their work with GSK entirely, opting to use a different adjuvant.
The Q4 revealed the company also shelved an OX40 agonist they had been developing with Merck for solid tumors and an OSM-targeting ulcerative colitis drug, withdrawing it from a Phase II study before any patients were enrolled. An effort to combine the autoimmune drug Benlysta with Rituxan for the rare disease Sjögren’s syndrome also fell short.
With the exception of the Sanofi and Merck KGaA deals, the setbacks did not come in GSK’s major programs, and the company saw a smattering of successes, including the first-ever FDA approval for lupus nephritis and similar nods for a BCMA-targeting multiple myeloma drug and, through its HIV subsidiary ViiV, the first long-acting antiretroviral therapy. Still, collectively they amount to a thousand cuts for a company that has spent, by one estimate, $29 billion over just 3 years to fortify its pipeline with clear potential blockbusters.
Barron and Walmsley will have a handful of opportunities to right the ship in the near future, beginning with the antibody they developed with Vir, which is due to read out on its first trial this quarter. The company also expects new data on Nucala and the launch of a pivotal study for their RSV vaccine, a long-sought and potentially highly lucrative product.
The company has also just made a bet on a new major Covid-19 vaccine effort, redoubling on their past support for CureVac with a new infusion of $180 million to ramp up manufacturing and help develop a new vaccine against emerging variants.