Clamor for GSK shingles shot points to bigger profits

[June 25, 2018] By Ben Hirschler

LONDON (Reuters) - GlaxoSmithKline is facing "unprecedented" demand for its new shingles vaccine Shingrix, suggesting the product could be a bigger money-spinner than the company and analysts initially thought.

In the short term, though, GSK faces a problem. While more than 1.5 million Americans have received Shingrix since the end of last year, others are having to wait, prompting the U.S. Centers for Disease Control and Prevention (CDC) to warn of shortages.

GSK said it had increased deliveries significantly and was vaccinating people against shingles far faster than in the past, when Merck & Co's Zostavax was the only product available. But it acknowledged it was struggling to keep up.

"The arrival of Shingrix has been met with an unprecedented level of demand from patients and healthcare professionals," a spokesman said.

"Healthcare professionals are vaccinating with Shingrix at a rate many times that of prior years, so ordering limits and intermittent shipping delays should be expected for Shingrix during 2018."

The CDC has recommended Shingrix over Merck's older and less effective vaccine in adults 50 years and older, spurring the current strong demand.

Consensus forecasts currently point to peak annual sales for Shingrix of around 1.5 billion pounds ($2 billion), according to Thomson Reuters data, with the U.S. market the main driver. But this number may prove to be too low, according Exane BNP analysts.

The brokerage reckons sales could rise to 3 billion pounds if Shingrix can achieve market penetration rates of around 60 percent - double the level seen with Zostavax but similar to levels achieved by Pfizer's pneumonia vaccine Prevnar.

GSK said in April that Shingrix had got off to a flying start, with sales of 110 million pounds in its first full quarter on the market and 2018 sales expected to top 400 million.

A company spokesman declined to give any update on that forecast ahead of second-quarter results next month.

Shingrix is a key new product for GSK Chief Executive Emma Walmsley as she strives to improve the company's commercial performance.

It is also crucial for showing the profit potential of GSK's large vaccines business, where GSK is looking to expand margins.

GSK has already achieved its mid-term goal of getting vaccine margins to 30 percent and Exane BNP believes it could hit 35 percent by 2020, helped by the roll-out of Shingrix and other premium vaccines like Bexsero and Menveo against meningitis.

Shingrix is given in two doses, separated by two to six months, while Zostavax is a single shot. Ensuring patients adhere to the two-shot regimen will be important in achieving the vaccine's full sales potential.

Shingles is caused by reactivation of the varicella zoster virus that is also responsible for chickenpox. Nearly all adults over 50 have the virus dormant in their nervous system and are at risk of it being reactivated with advancing age.

(Reporting by Ben Hirschler; Editing by Mark Potter)

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