Is this GSK's new blockbuster drug?

Studies on the drug giant's possible new vaccine produced "truly exceptional results", raising hopes it can be one of the jewels in the GSK pipeline.

Hopes for a new blockbuster in the GSK (LSE:GSK) portfolio have been boosted by trial results showing a potential end to a 60-year wait for a vaccine on acute respiratory infections.

Phase III studies on GSK’s respiratory syncytial virus (RSV) vaccine candidate for people over 60 showed a 94.1% reduction in severe disease and overall vaccine efficacy of 82.6%.

GSK’s chief scientific officer Tony Wood said: "These are truly exceptional results given that today RSV remains one of the major infectious diseases without a vaccine, despite over 60 years of research.”

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In older adults, RSV can exacerbate underlying conditions and lead to pneumonia. It causes 420,000 hospitalisations and 29,000 deaths in over-60s each year in industrialised countries.

The vaccine candidate is viewed as one of the potential jewels in the GSK pipeline, with the RSV product among the growth drivers planned for launch by 2026. One of the others it hopes will be “first and best-in-class” is an antibiotic for urinary tract infections.

GSK believes the RSV market could be worth £5 billion but it faces stiff competition to be first as Pfizer, Johnson & Johnson and other biopharma companies are also in the race.

UBS said: “Blockbuster vaccines do not come around very often, and the focus and excitement is hence understandable. GSK and Pfizer's vaccines have succeeded in phase III but GSK trumps Pfizer at face value.”

The Swiss bank thinks that GSK can generate £1.7 billion from the vaccine by 2030, but adds that today’s developments will be insufficient to shift the stock market’s focus from the uncertainty around US litigation on heartburn drug Zantac.

Shares fell another 17.2p to 1,341p today, then lurched lower still following the US inflation announcement at 1.30pm. They're now down over a fifth since GSK said it had been named as a defendant in about 3,000 filed personal injury cases in federal and state court.

GSK added in August that it was too early to reliably estimate what liability, if any, it or any other parties may have in the litigation. However, it said the US Food and Drug Administration and the European Medicines Agency had found no evidence of a causal association between ranitidine therapy and the development of cancer in patients.

The Zantac issue has overshadowed the company’s attempts to convince the City of its standalone potential since splitting off consumer healthcare operation Haleon (LSE:HLN) in July.

Chief executive Dame Emma Walmsley’s targets for New GSK include compound annual growth in sales and adjusted operating profit of more than 5% and 10% respectively at constant exchange rates.

GSK’s research and development spending in vaccines increased by a third to £887 million last year, with milestones on seven products including RSV forecast for the unit in 2022.

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The company is due to post an update on its progress in third quarter results on 2 November. In July’s first set of results as a focused biopharma company, GSK reported 19% growth in quarterly sales to £6.9 billion and a rise in adjusted earnings per share of 23% to 34.7p.

Dame Emma added that R&D improvements and a strong balance sheet following the Haleon demerger had created “new capacity and flexibility” for GSK to invest in growth and innovation for patients and shareholders.