GSK 4Q13 – No longer seeking partner on once-weekly GLP-1 agonist Eperzan (albiglutide); speculation about broader cardiometabolic portfolio – February 5, 2014

GSK CEO Sir Andrew Witty led the company’s 4Q13 performance update today. Our top three highlights from the call are detailed in this report, including management’s announcement during Q&A that it is no longer seeking a partner for once-weekly GLP-1 agonist Eperzan (albiglutide) and that it can see albiglutide becoming a spring-board for developing a broader (not solely diabetes-focused) cardiometabolic pipeline. We assume sales for Avandia were very small; it was not mentioned in the press release.

1. Although GSK had previously considered various partnership opportunities to promote albiglutide in different regions (see our 3Q13 report,) management announced during Q&A this morning that it is now planning to commercialize the drug solo – management noted that while this means the company may have to build up extra resources to do so, it would allow GSK to use albiglutide as a springboard for building out a broader cardiometabolic franchise in a fashion in which it would be “unencumbered” by another party. This move should be a positive for GSK if the pipeline develops for the company – while the regulatory environment in diabetes is certainly becoming more difficult to navigate (and we presume this is at least partly why management explicitly said it would take a broader focus than simply diabetes), people with diabetes typically have a wide range of cardiometabolic deficiencies and need a comprehensive set of treatments to maintain optimal health. Joint ventures and partnerships can also involve extra noise and decision-making friction as we saw with the now –dissolved diabetes partnership between BMS/AZ and the former one between Amylin/Lilly – perhaps this was also a factor for GSK’s decision. We had originally been a bit surprised they wanted a partner, so this move is not altogether surprising. We do see it as clear commitment that they want to move forward on diabetes and we hope that resources will emerge from the rest of GSK to enable them to do so. We also look forward to learning move about albiglutide so as to be able to better assess their likely success in this very important GLP-1 market. As opposed to other classes like DPP-4 inhibitors, where most compounds are perceived as very similar (with the exception of once-weekly formulations in development), later generations of GLP-1 by contrast have been perceived as more user-friendly and provider-friendly. We’ll be eager to see where albiglutide aligns on this front.

2. Management reiterated that it is expecting news on the approval of albiglutide in Europe and the United States in the first half of 2014 (US PDUFA date is April 15, 2014). As a reminder, albiglutide received a positive CHMP opinion in the EU in late January 2014 (see our report here). If approved, Eperzan would become the second once-weekly GLP-1 agonist to reach the market in both the US and EU (after AZ's Bydureon [exenatide]). The drug has two proposed indications in Europe: 1) as a monotherapy in patients who are unable to take metformin; and 2) as an add-on to other glucose-lowering medications, including basal insulin. Notably, this is a broader indication than the GLP-1 agonists currently on the market have received (none are approved as a monotherapy alternative to metformin).

3. As in previous quarters, GSK also mentioned the fallout from the Chinese investigation of the company’s alleged inappropriate business practices in that country. GSK still does not know when Chinese regulatory authorities will reach a decision or settlement on the issue. While GSK attributed an 18% decline in its Chinese Pharma and Vaccines business over the course of 2013 to the troubling events in China, it also noted that the business appears to have stabilized in the fourth quarter.

Honorable Mention: While not mentioned on the call, GSK announced broad changes to its global sales and marketing practices in December 2013 (see their press release, which positions the move as aligning incentives with the best interests of patients). Specifically, GSK plans to eliminate individual sales targets for sales representatives that work directly with prescribing HCPs and instead evaluate and reward sales professionals based on their technical knowledge and quality of the service they provide. The new program is based on a model that has been in place in its US division since 2011, and GSK aims to have this payment model in place in all of its locations by early 2015. GSK also plans to phase out direct payment to medical professionals for speaking engagements or attendance at conferences over the course of two years. In the place of these payments, GSK plans to provide unsolicited independent medical education grants for healthcare professionals, and to improve its use of digital technologies to distribute product and disease area information more effectively. We will be keen to see if other pharmaceutical companies will consider following GSK’s lead.

Questions and Answers

Q: When I look forward at the demographic trends, they seem to point to cancer, Alzheimer’s and diabetes as being three targets for society. Are you happy with your existing pipeline and research competencies in those areas?

A: On diabetes, we are increasingly confident around albiglutide and, as we spend more time interrogating the data, we believe we have a very nice positioning for the product assuming it is approved. We expect regulatory decisions, both in Europe and America, in the next few months. However, rather than being focused on building a diabetes franchise, I am more and more thoughtful about how we can develop a broader cardiovascular metabolic franchise. We are thoughtful about it from that perspective and are not so much minded towards going to a diabetes only focus.

Q: Regarding albiglutide: you hinted at a cardiometabolic franchise of some sort, but I am trying to understand how you plan to promote that product. You previously indicated that you have been looking at alternative strategies other than perhaps marketing it yourself. Is that still the plan?

A: As far as albiglutide is concerned, we have spent a lot of time looking at the various options, and we feel that we have a compelling positioning strategy for the brand. Although we shall expand some of our resource to support it, we believe that we can commercialize it on our own, partly because we feel good about the positioning and also because of the opportunity for it to be the first of a number of products in the cardiovascular metabolic franchise. When we looked at this around 18 months ago, we were looking at it very much as a stand-alone product but we no longer look at it as a stand-alone product. We look at it more as the first in what could be an emerging therapeutic area for us and, therefore, it made more sense to do that in an unencumbered way, albeit we will have to build some extra resource, probably through our contract partner, at least initially.

-- by Andrew Foley, Manu Venkat, Jessica Dong, and Kelly Close