16th Jun 2023 11:59
(Alliance News) - GSK PLC must gain approval for its "centrepiece" cancer drug momelotinib to validate its mergers & acquisitions pipeline but the extension of its review period in the US does not automatically spell trouble, according to analysis from Shore Capital on Friday.
Shares in the pharmaceutical company were up 0.7% at 1,384.20 pence in London on Friday morning.
GSK said that the US Food & Drug Administration had extended the review period of its new drug application for momelotinib by three months, with September 16 as the new action date.
Momelotinib is focused on treating myelofibrosis, a rare blood cancer. The illness is characterised by constitutional symptoms, splenomegaly and progressive anaemia, all of which momelotinib is believed to improve, and affects around 25,000 people in the US, said GSK.
Shore analyst Sean Conroy said that momelotinib was the "centrepiece" of GSK's USD1.9 billion acquisition of Sierra Oncology in July last year. Consequently, he said gaining FDA approval was "a must for the company as it will provide important validation for GSK’s abilities to supplement its mid to late-stage pipeline through M&A."
However, Conroy added that the delay "isn't necessarily a red flag" since it was intended to allow time to review recently-submitted new data. This "could potentially relate to [GSK] seeking a line-agnostic label for the drug in myelofibrosis".
Consensus currently anticipates around USD400 million in sales from momelotinib in 2027.
However, Shore's Conroy cautioned that the withdrawal from the market of multiple myeloma drug Blenrep - which GSK had expected to contribute over USD3 billion in revenue - and the label narrowing for ovarian cancer treatment Zejula both have "placed a question mark on GSK's capabilities in oncology".
"We continue to view GSK’s oncology business as long-term optionality with plenty of interesting but early-stage assets. We see more significant opportunities for it to build on key areas of strength within vaccines and infectious diseases," Conroy explained.
Shore maintained its future value of GSK at 1,850p per share and rated it as 'buy', which Conroy said was still a discount due to uncertainty around the future of its drug Zantac and reflecting questions about GSK's long-term growth.
The FDA ordered Zantac's removal from the market in 2020 after finding possible consumer exposure to unacceptable levels of a probable human carcinogen. The drug currently is the subject of litigation in California, with one resident claiming that it caused him to develop bladder cancer.
"We still believe a worst-case, up to USD30 billion scenario for litigation is being reflected in the share price and the improving growth outlook overlooked," Conroy concluded.
By Emma Curzon, Alliance News reporter
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