Earlier this month, GSK's (GSK 0.31%) older-adult vaccine candidate for respiratory syncytial virus (RSV) moved one step closer to approval. The U.S. Food and Drug Administration's (FDA) Vaccines and Related Biological Products Advisory Committee voted unanimously (12 to 0) in favor of the vaccine's efficacy and 10 to 2 in favor of its safety.
With a decision expected from the FDA by May, the vaccine candidate could launch in time for the next RSV season. Along with Pfizer's RSV vaccine candidate, GSK's is on its way to becoming one of the first approved vaccines to prevent RSV. But how much of a boost could this provide to the pharmaceutical company's revenue?
Let's examine the phase 3 clinical trial results of the vaccine candidate and the potential RSV vaccine market to come up with an answer.
A highly effective vaccine for an unmet medical need
RSV is a very contagious seasonal virus that impacts the respiratory tract and lungs. Unsurprisingly, RSV is typically accompanied by a congested or runny nose, a cough, sneezing, and fever.
While anyone can experience a severe case of the virus, children under age five and adults over 65 with weakened immune systems or co-morbidities, such as heart or lung disease, are most at risk. In fact, RSV hospitalizes 58,000 to 80,000 children under five years old and 60,000 to 160,000 adults 65 years and older in the United States each year.
The good news is that numerous pharmaceutical companies are currently developing RSV vaccines for at-risk groups. These include Pfizer, Sanofi and AstraZeneca, and Johnson & Johnson.
GSK enrolled nearly 25,000 patients at least 60 years of age in its phase 3 clinical trial to receive either its RSV vaccine candidate, called RSVPreF3 OA, or placebo before the RSV season. At the median follow-up of 6.7 months (the approximate length of a full RSV season), overall vaccine efficacy was 82.6% in the vaccine group compared to the placebo group. With a 94.1% efficacy rate in protecting against severe RSV-related lower respiratory tract disease, the vaccine was quite potent.
Image source: Getty Images.
Massive sales potential
Upon regulatory approval, GSK's vaccine candidate could prevent countless older adults from being hospitalized each year. This could also mean great things for the company's top line. Demand for preventative vaccines is very high. So it isn't a shock that the global adult RSV vaccine market could haul in an estimated $7 billion in annual revenue. GSK's RSV vaccine candidate is positioned to be the first to market alongside Pfizer's vaccine candidate.
Considering this first-mover advantage, I believe GSK can seize 20% of the global adult RSV vaccine market in such a crowded field. This would equate to a $1.4 billion lift to GSK's revenue. Stacked up against the $34.6 billion in revenue that analysts expect from the company in 2023, this is equivalent to a 4% boost in GSK's revenue base.
With dozens and dozens of medicines and vaccines in its development pipeline, the future appears to be bright for the company. This is why analysts believe that GSK's non-GAAP (adjusted) diluted earnings per share (EPS) will grow by 5.3% annually over the next five years.
The stock is deeply discounted
The downturn in broader markets over the past year has not been kind to GSK. Shares of the stock have shed 19% of their value during that time. But this looks to have made the stock a bona fide bargain.
GSK's forward price-to-earnings ratio of 8.7 is far below the drug manufacturers industry average of 12.9. This significant undervaluation arguably prices in the risks relating to lawsuits over GSK's heartburn drug Zantac. At present, GSK is an intriguing pick for investors seeking a mix of value and income.
