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 eye-related side effect concerns. This decision, despite GSK's efforts to revive the previously withdrawn drug with new trial data, significantly impedes the company's pipeline expansion strategy and its goal of offsetting declining sales, particularly given Blenrep's projected peak annual sales exceeding £3 billion. Analysts now consider formal FDA approval next week unlikely, as the agency typically aligns with panel recommendations.

Analysis

GSK has experienced a significant setback with its blood cancer drug, Blenrep, following a U.S. FDA advisory panel's recommendation against its approval. This negative vote, driven by persistent concerns over eye-related side effects, triggered a sharp market reaction, with shares falling over 6% to 1,315 pence. The decision undermines the company's attempt to revive the drug, which was previously withdrawn from the U.S. market in 2022. This event materially impacts GSK's strategy to bolster its pipeline and offset declining revenues from its top drugs, as Blenrep was projected to generate peak annual sales exceeding £3 billion. Analyst consensus, including commentary from JPMorgan, suggests a formal FDA rejection is highly probable next week, as the agency typically follows its panel's advice. The share price decline has pushed the stock to a year-to-date loss of approximately 2%, reflecting investor concern over the company's near-term growth trajectory.

Key Decisions for Investors

• Given the high probability of a formal FDA rejection next week, investors should anticipate continued negative sentiment and potential downward revisions to GSK's long-term revenue forecasts.
• The failure of Blenrep places increased pressure on the rest of GSK's pipeline; therefore, a critical re-evaluation of the company's ability to offset revenue cliffs from maturing assets is warranted.
• Monitor the company's upcoming statements for any strategic shifts or revised financial guidance following the formal FDA decision, as this will be crucial for assessing the long-term investment thesis.