City broker Shore Capital remained upbeat on the prospects for shares in GSK PLC (LSE:GSK, NYSE:GSK) in spite of the failure of a key clinical trial for a new bone marrow cancer drug.
It repeated a ‘buy’ recommendation and said stock in the pharma giant was materially undervalued compared with its peers.
Shore’s £18 price target represents a 30% premium to the current price, but a significant discount to the sector average price-to-earnings multiple.
The upbeat assessment of value came on the back of a disappointing readout from its final-stage DREAMM-3 evaluation of Blenrep, a putative treatment for hard-to-treat multiple myeloma.
Researchers found the drug was no better than the current standard of care.
The emphasis for GSK going forward will be to assess whether Blenrep is effective as a second-line treatment in combination with other drugs.
This is the focus of the DREAMM-7 and DREAMM-8 trials, which are ‘now likely to define Blenrep’s fate’, Shore said. Readouts from the two studies are expected in the first half of next year.
Shore was predicting sales of the product, which has received approval from drug watchdogs in Europe and the US to be used in patients who have exhausted the current treatment regimens, would be a ‘conservative’ £500mln by 2026.
Other sources were more bullish with one forecast putting annual revenues at triple that figure.
In the final hour of trade, the shares were down almost 5% at £13.75, wiping £2.5bn off the value of GSK.