GlaxoSmithKline's 'Unexpected Disappointment'
GlaxoSmithKline plc (ADR) (NYSE: GSK) is near its 52-week lows after having fallen 6.2 percent this year.
Following topline results from GlaxoSmithKline's SUMMIT study, Goldman Sach's Keyur Parekh called the results an "unexpected disappointment."
For GSK financially, the results were only a "marginal disappointment," Parekh said, though the result "raises deeper questions" around GSK's management.
GlaxoSmithKline released results from its SUMMIT study earlier this week, which failed to meet the goal when studying BREO in patients with COPD. Those results did show that BREO was associated with a lower risk of dying; however, the results were not statistically significant. That was an "unexpected disappointment," according to Goldman's Parekh.
But the fiscal impact from this would be "marginal," Parekh noted. In 2020, Goldman models £1 billion in revenue – a number that is "unlikely" to be challenged by these results. However, for Parekh, the bigger issue is how these results cast doubt on GSK's "overall R&D strategy and spend."
Goldman's solution – GSK should narrow its therapeutic focus and reassess its overall R&D spend. That could lead the company to "meaningfully improve" its R&D productivity. If these results serve as the catalyst to push GSK management to focus more, "it could act as a LT silver lining," Parekh said.
Goldman reiterated its estimates, ratings and price target.
Much of GlaxoSmithKline's year-to-date losses have come in the past month, when the stock shed 10.5 percent. At present levels, the stock yields 6.2 percent.
Latest Ratings for GSK
Jun 2015 | Morgan Stanley | Downgrades | Overweight | Equalweight |
Jan 2015 | New Street Research | Downgrades | ||
Jul 2014 | Mainfirst | Downgrades | Underperform |
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