A regulatory delay for GSK PLC (LSE:GSK, NYSE:GSK) with the 'centrepiece' drug of its US$2bn Sierra Oncology (NASDAQ:SRRA) acquisition last year "isn’t necessarily a red flag", according to an analyst.
The FTSE 100 pharma group revealed the US Food & Drug Administration (FDA) has extended the review period for momelotinib by three months with a final decision now expected in September 2023.
It is the third of three new drug or vaccine approvals that GSK was aiming to deliver this year, noted Shore Capital's Dr Sean Conroy.
As the centrepiece of the Sierra purchase it made last year, "gaining approval for this drug is, in our view, 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", said Conroy.
He said the delay may not be a red flag as it relates to allowing time to review additional data that have been recently submitted, which he said "could potentially relate to the company seeking a line-agnostic label for the drug in myelofibrosis (MF)", a rare, fatal cancer that affects the bone marrow and the normal production of blood cells.
This market is expected to reach US$4bn by 2027 largely underpinned by the first drug on the market, Jakafi, which has a first mover advantage, Conroy said.
The consensus among City analysts is for circa US$400mln sales in the 2027 financial year, he added.
GSK's recent withdrawal of oncology drug Blenrep from the market and narrowing of the regulatory label for Zejula, another cancer medicine, "has placed a question mark on GSK’s capabilities in oncology," Conroy added, "particularly given the former had been flagged by GSK to become a blockbuster".
However, the analyst said he continues to view GSK’s oncology business as providing "long-term optionality with plenty of interesting but early-stage assets", but with "more significant opportunities for it to build on key areas of strength within vaccines and infectious diseases".
ShoreCap's 'buy' rating was reiterated and fair value for the shares was maintained at 1,850p, still a discount to the sector "reflecting questions around long-term growth but encompassing our view that a value disconnect currently exists as uncertainty on Zantac continues to weigh on the share".
On Zantac, the analyst said he believes a worst-case scenario is currently reflected in the share price, of up to US$30bn of litigation, with "the improving growth outlook overlooked".