Investors in Glaxosmithkline got two doses of good news yesterday. First, one of a trio of drugs that Emma Walmsley, the chief executive, prioritised when she took charge in April last year delivered encouraging results in a late-stage trial.
The Gemini trial was studying the combination of two drugs for HIV, dolutegravir and lamivudine, which Glaxo hopes will allow patients to cut the number of medicines they take from three or more and so reduce the side-effects they suffer.
Dolutegravir is potentially worth £5.2 billion in sales by 2022, according to consensus forecasts among analysts. It was part of Juluca, another two-drug treatment for HIV, the world’s first, approved by the US Food and Drug Administration in November and now on the market.
Both treatments are given as once-daily pills but, significantly, the combination in the Gemini study is for patients not currently being treated, a potentially more lucrative and larger patient population.
The successful Gemini trial results mean Glaxo will submit the findings to regulators this year, with a view to marketing the drug in the US, followed by the EU. The findings are important as the HIV market is Glaxo’s highest-margin business.
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HIV treatment is a key part of Glaxo’s pharmaceuticals division, which remains its core business. Its other existing HIV treatments include Tivicay — dolutegravir — and Triumeq — a combination of abacavir, dolutegravir and lamivudine — and the HIV portfolio generated sales of £4.4 billion last year, a quarter of division sales. The HIV division is run as a joint venture, ViiV Healthcare, with Glaxo the majority owner and Shionogi of Japan and Pfizer of the US partners.
The FDA’s response to the Gemini study will be interesting as Glaxo said last month that it was assessing a separate study by the US National Institutes of Health (NIH) in Botswana which potentially links dolutegravir to birth defects.
GSK said there is “no known mechanism linking dolutegravir with these types of birth defects” and “no relevant findings” when tested on animals. Glaxo has notified regulators and is working with the World Health Organisation and the NIH. It remains highly confident about dolutegravir.
Analysts at UBS said on “face value” the Gemini results were good news, but full data was required, which is likely to be presented at the International Aids Conference in Amsterdam next month.
Analysts at Jefferies have forecast peak year sales of $1.5 billion for the Gemini combination and said yesterday’s data would help Glaxo defend itself against competition from a product by its US rival Gilead.
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The second dose of good news for Glaxo was more short-term. Mylan, the US generic drugs company, said on Wednesday that it faced delays for its generic version of Glaxo’s Advair inhaler as the FDA had identified “minor deficiencies” in its submission. Analysts still think it could be approved by end of year.
Such is the significance of Advair sales to Glaxo that it previously outlined two sets of guidance, one assuming a competitor launches in the middle of 2018, another assuming no launch this year. The latter guidance, of adjusted earnings per share growth of 4 to 7 per cent, seems more likely.
All told, it left the shares up 2.27 per cent yesterday at £15.80, extending the rally this year to almost 20 per cent.
Expectations have been rising ahead of a strategy update next month from Hal Barron, its chief scientific officer. Analysts are hoping plans to sharpen up its lacklustre pharma division with a greater focus on commercialising fewer but bigger drugs will deliver in the long term.
ADVICE Hold
WHY Progress replacing sales from generic threat to Advair blockbuster and long-term hopes for pharma shake-up
Revolution Bars Group
Investors in Revolution Bars Group who rejected the board’s advice to accept a 203p-a-share bid from Stonegate Pub Company in October must be pondering the wisdom of their decision (Dominic Walsh writes). The share price has since remained firmly below the offer price and after yesterday’s profit warning sent it 7.4 per cent lower to 145p there seems little prospect of a return to such heights any time soon.
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After that embarrassment, the board could have entered talks over an alternative merger proposal from Deltic Group, the nightclub operator. However, it refused to countenance anything but an all-cash offer and opted to go it alone, declaring that it remained confident over the “underlying strength” of the group and its “ability to operate and grow as a standalone business”.
Its confidence looks misplaced, however, after its admission yesterday that its underlying earnings for the year to the end of June would be below market expectations and no better than in line with last year’s earnings. It said like-for-like sales in the second half had fallen by 1.7 per cent amid “challenging and volatile trading conditions” as extremes of weather — snow in March and a heatwave in recent weeks — conspired to deter revellers from visiting its Revolution vodka bars and Revolución de Cuba establishments.
The board also blamed disruption from last year’s bid approaches, not helped by the lack of a chief executive after the decision to sack Mark McQuater a day after Stonegate’s £101.5 million offer was rejected.
Rob Pitcher, the former Mitchells & Butlers executive who takes over the week after next, cannot start soon enough, although amid the bad news he will find plenty of positives to encourage him. For a start, the five recently opened bars were delivered on schedule and are all performing to expectations. This bodes well for the six more due to open in the coming financial year. He is also joining just as new labour-scheduling software takes effect, which will be invaluable given soaring wage costs.
The biggest positive, though, is that Mr Pitcher is taking on a business with two strong brands with 73 bars that, as far as we are aware, includes few, if any, duds — unlike so many of Revolution’s pub and restaurant peers.
ADVICE Avoid
WHY New CEO will need time in tough trading environment