With supply constraints loosening late last year, GlaxoSmithKline’s shingles vaccine Shingrix was finally ready to jet ahead. Then COVID-19 happened, sparking a new concern about the high-flying product: Doctors aren’t eager right now to protect patients from a disease they might never get.
There’s little doubt Shingrix’s fast rise will once again be interrupted, this time by ebbing demand, GSK executives acknowledged during the company’s first-quarter earnings call. Wellness visits are down by more than 66%, said Luke Miels, president of global pharmaceuticals for GSK. That’s a decline that could affect some of the company’s other vaccines, too, including its hepatitis and meningitis shots.
Still, Miels and his colleagues played down COVID-19 impact: It doesn’t affect GSK’s overall expectations for the product, they said. “We’re really pleased with the progress we’re making on the supply,” said CEO Emma Walmsley during the call, adding that “the overall demand is very strong.”
Perhaps, but investors have good reason to be nervous. Shingrix sales soared 81% year-over-year to £647 million during the first quarter, beating the consensus estimate of £526 million—but physicians and pharmacies continue to hold off on routine services such as vaccinations. Total Shingrix prescriptions fell 84% since February, according to a Bernstein report citing IQVIA data.
Assuming routine doctor visits start back up in the latter half of the year, GSK has a plan in place to restart demand for Shingrix, Miels said. Part of the company’s marketing effort will focus on encouraging physicians to “link” Shingrix shots with the upcoming flu vaccination season, he said.
“Once [quarantine] restrictions are lifted, the physicians are going to seek to recover these patients. They’ve got practices to run,” Miels said during the call. “I think the key thing here is we haven’t seen a reduction in people wanting to get a Shingrix shot. What we’ve seen is a reduction of people who don’t want to get COVID and have been told to stay at home.”
Vaccine worries overshadowed what was otherwise a strong quarter for GSK. The company reported that its first-quarter sales rose 19% year over year to £9.1 billion ($11.3 billion), beating the consensus estimate of £8.8 billion. Earnings per share of 37.7p beat estimates by 20%.
Much of the growth, ironically enough, may be attributable to COVID-19. Like several of its Big Pharma peers, GSK reported that sales growth was driven by “stock building for many products.” Jefferies analysts said in a note to investors that although the degree of COVID-19’s impact on stocking couldn’t be quantified, it’s likely the virus has increased demand for some of GSK’s prescription and over-the-counter products.
COVID-19 stocking likely benefitted GSK’s HIV portfolio, including the newly launched Dovato, Jefferies said. Sales of the product, which has been heavily advertised, came in at £66 million for the quarter—far surpassing the £45 million analysts were expecting.
And the pandemic could also benefit GSK’s ongoing efforts to build up its pipeline—a cornerstone of the company’s newly launched restructuring. GSK has embarked on a plan to split into two companies, one of which will encompass its consumer health joint venture with Pfizer and the other focused on developing biopharma products.
Vaccine development is one of GSK’s priorities as it beefs up its biopharma product line, and Walmsley hopes a COVID-19 vaccine will be one of the successes to emerge from the pipeline. Earlier this month, GSK teamed up with Sanofi to work on a vaccine, in the hopes of launching a clinical trial in the second half of this year. That would put the vaccine on track for an FDA filing in 2021.
That’s one reason Jefferies analysts are urging investors to ignore the short-term impact of COVID-19 and focus on the long-term potential of GSK’s R&D strategy. They predict earnings momentum will pick up after 2021, saying in their report that “we see clinical news kick-starting belief in the steadily reinvigorated pipeline.”