GSK shares fall after blood cancer drug likely headed for U.S. rejection

GSK shares fell over 6% after a U.S. FDA advisory panel recommended against approving its blood cancer drug Blenrep, citing persistent concerns over eye-related side effects. This decision is a significant setback for GSK, which had aimed for over £3 billion in peak annual sales from Blenrep and is actively seeking to expand its pipeline to offset declining revenue from other key products. Analysts anticipate the FDA will likely follow the panel's advice in its formal decision next week, further impacting GSK's growth strategy.

Analysis

GSK faces a significant setback following a U.S. FDA advisory panel's recommendation against the approval of its blood cancer drug, Blenrep, due to persistent concerns over eye-related side effects. The market reacted swiftly and negatively, with GSK shares falling over 6% to become the top loser on the FTSE 100. This event is particularly damaging as it represents a second failure for the drug in the U.S. after its 2022 market withdrawal, undermining the company's new trial data which showed improved overall survival. The rejection jeopardizes a critical component of GSK's growth strategy, which relied on Blenrep to generate over £3 billion in peak annual sales to help offset declining revenues from other key products. Consensus among analysts, including those from Berenberg and JPMorgan, is that the FDA will likely formalize the rejection in its upcoming decision, amplifying the challenge for GSK's pipeline and contributing to the stock's approximate 2% year-to-date decline.

Key Decisions for Investors

• Investors should anticipate continued negative pressure on GSK's share price pending the formal FDA decision next week, as the advisory panel's vote makes a U.S. rejection the base-case scenario.
• The likely failure of Blenrep in the U.S. market necessitates a downward revision of GSK's long-term revenue forecasts, given the loss of a projected £3 billion in peak annual sales.
• Monitor for management's strategic response to this pipeline gap and any regulatory decisions for Blenrep in the more than 10 other countries where it remains under review, which could offer a partial, though less significant, revenue offset.