Broker snap: Panmure still upbeat about Glaxo despite clinical-trial disappointment

5th Sep 2013 10:25

Panmure Gordon has maintained its 'buy' recommendation for pharmaceutical giant GlaxoSmithKline but admitted that it was disappointed with the firm's setback on its potential new skin-cancer treatment.Glaxo said on Thursday morning that its MAGE-A3 treatment did not meet the first co-primary endpoint in phase III melanoma clinical trial."W hen we turned 'buyers' in December 2012, we pointed to 14 pipeline opportunities which provided significant option value. We had identified MAGE-A3 as one of three particularly transformative opportunities," said analyst Savvas Neophytou."In that context it is disappointing to see this morning that the drug had failed its first of three phase III trial read-outs for the treatment of melanoma. We view today's failure as a missed upgrading opportunity but it is unlikely, in our view, to trigger downgrades."The broker explained that MAGE-A3 is a theraputic cancer vaccine - "the holy grail of the industry" - but was seen as very high risk given that it is an unproven area. As such, consensus forecasts for this product are heavily risk-adjusted so the bad news should not prompt any major downward revisions.In addition, there are a further two read-outs pending so Panmure said it was not changing its estimates for now.Neophytou said: "Although not the cheapest [on a valuation basis], the company has been through the majority of its patent expiries, big liability settlements and boasts a strong balance sheet and very little M&A risk. With shareholder returns remaining strong, we remain 'buyers' of the stock with a price target of 1,850p."The stock was down 1.89% at 1,634.5p by 10:41 on Thursday.BC