Glaxosmithkline administered some positive news to investors and patients regarding the eagerly-awaited regulatory approval for an HIV treatment that could mark a shift in the treatment of the virus (Alex Ralph writes).
ViiV Healthcare, Glaxo’s HIV joint venture, received approval from America’s Food and Drug Administration, the industry regulator, for the first single-tablet, two-drug regimen for patients not currently being treated.
The approval for Dovato, as the once-daily pill will be marketed, combines dolutegravir and lamivudine and is designed to allow patients, who are living longer, to reduce the number of medicines they take, typically three, and therefore to limit the side-effects they suffer.
The drug was one of three that Emma Walmsley, 49, has focused on since she became group chief executive in April 2017 and the chances of approval had overcome a major hurdle last June when it produced positive results from a late-stage study called Gemini.
The share price reaction today, 2¾p, or 0.2 per cent, lower at £15.85½, indicated investors had priced in the US approval.
However, the breakthrough is important to Glaxo’s pharmaceutical division, whose performance is key to Ms Walmsley’s future. She has prioritised reviving the pharma division, in part by focusing on fewer potential blockbusters, and HIV treatments are vital to its portfolio and drugs pipeline.
Glaxo is a FTSE 100 company, based in west London, that is valued at £79 billion. It was formed through the merger in 2000 of Glaxo Wellcome and Smithkline Beecham.
Its HIV business generated revenue of £4.7 billion in the year to the end of December, up 11 per cent on a constant currency basis, and representing 27 per cent of its pharmaceutical division. In turn, the division posted revenue of £17.3 billion, up 2 per cent, and accounting for more than half of group sales. Its other two key divisions are consumer healthcare, whose brands include Sensodyne toothpaste, and vaccines, such as for meningitis and shingles.
The US, where Glaxo has prioritised regulatory approval, is its biggest geographic market, representing £12 billion of revenue.
Its HIV division is run as a joint venture with Shionogi of Japan and Pfizer of the US, and Glaxo plans to continue to strike partnerships with competitors on products.
Dolutegravir is at the heart of Glaxo’s HIV portfolio, making up the majority of revenues and within its treatments Triumeq, Tivicay and Juluca. Analysts forecast sales of £5.3 billion for Dolutegravir by 2022.
As analysts reiterated yesterday, however, the key to the success of Dovato, a two-drug treatment for recently-diagnosed patients not currently being treated, will be the traction it generates with physicians because of the well-established three-drug treatments from rivals.
Shore Capital, the City broker, notes that an important factor will be the “resistance profile” of Dovato and the market will be following the “real world” data.
The FDA’s approval, while expected, has overcome a potential hurdle. Glaxo is assessing a separate study by the US National Institutes of Health in Botswana which potentially links dolutegravir to birth defects. In December, the World Health Organisation and the US Department of Health and Human Services issued new antiretroviral treatment guidelines endorsing the use of dolutegravir but recommends alternative treatments at time of conception and in early pregnancy.
ADVICE Hold
WHY Renewed focus and investment in core pharmaceuticals division under new, well-regarded management
Smart Metering Systems
It’s fair to say that the rollout of smart meters to homes and businesses hasn’t been without its problems (Greig Cameron writes). A deadline set by the government to have the devices offered to all premises by the end of next year has exasperated both the energy supply industry and many consumers.
The little boxes will play an important part in modernising the grid over the years to come, particularly as electric vehicle charging points and home battery storage become more prevalent, something that Smart Metering Systems knows all too well.
Founded in 1995 and floated in 2011 at 60p a share, it monitors and maintains a portfolio of more than three million gas and electricity meters across the UK. It is installing thousands more each week on behalf of independent energy suppliers, as well as managing the data that is produced. Recent annual results for 2018 showed its domestic smart meter portfolio had reached 846,000. Analysts believe that it could grow to more than four million.
More than 38 million devices still need to be installed and owning the infrastructure gives rise to reliable income streams. Smart Metering reported that its revenue had risen by 24 per cent to £98.5 million in 2018, with £75.3 million of that categorised as recurring. Strip out a writedown related to the value of its older-style meters and the underlying pre-tax profit rose 13 per cent to £25.1 million. The dividend was lifted 15 per cent to 5.98p, with analysts pencilling in a steady rise in that payment to 10p by 2022.
Even with a strong market opportunity, an experienced management team and a decent track record on delivery, the share price has failed to hit the heights of almost 875p touched in the final days of 2017. In May last year the shares were changing hands for 830p, but towards the end of December investors could have picked them up at 512p. They rose 3½p, or 0.6 per cent, to 533½p yesterday.
Moves to look at new areas, such as electric vehicle charging, the supply of low energy lighting and home battery storage, are at an early stage but could have synergies with what SMS is already doing.
ADVICE Hold
WHY Reliable-looking dividend and shares may be boosted as more meters are installed
