GlaxoSmithKline has slipped back after another drug disappointment.
The company has stopped a high profile clinical trial using the Mage-A3 vaccine to treat lung cancer, after deciding it would not be possible to find a subgroup of patients who might benefit. The news follows an admission that the treatment did not help patients with non-small cell lung cancer in phase 3 trials. A study to test the vaccine in melanoma will continue. Savvas Neophytou at Panmure Gordon said:
Another disappointment for cancer candidate Mage-A3, finally failing in a second phase 3 trial, this time in lung cancer. The trial had previously failed in overall lung cancer but the company had been exploring via data mining the possibility a sub-population can be identified that benefits from this treatment. The process failed to identify a way forward, therefore the trial was stopped on grounds of futility. Given the disappointment in another phase 3 trial in melanoma last year, we had written the product off so we make no changes to forecasts at this stage. With a further read-out pending (in melanoma subgroup) we are not pinning much hope on the product. Hold.
Aside from Mage-A3, Liberum analysts were generally negative on the company.
Our proprietary analysis shows Glaxo's lack of innovation has left it as an outlier in the sector. Add to this, our non-consensual view that the respiratory franchise will decline to 2019, and we are left 14% below consensus earnings per share in 2019. We also highlight Glaxos's inability to use the balance sheet to enhance the lacklustre 3% compound annual earnings growth in 2014-19. Accordingly, we cut our price target to £15.00 (£16.00).
We highlight the root of Glaxo's problems lie in research and development. With the worst pipeline in the sector, a meagre 47% recent Phase 3 success rate (50% lower than the industry) and poor development decisions, it is clear why consensus 2015 earnings per share has fallen by 25% in just 2 years. Glaxo is our least favoured stock in the sector.
Glaxo is currently 8p lower at 1585.5p.
