GSK: Reasonably Priced Bellus Acquisition Adds Intriguing Pipeline Cough Treatment

GSK’s GSK $2 billion acquisition of Bellus Health nets phase 3 cough treatment camlipixant at a reasonable price. We don’t expect any major changes to our fair value estimate for GSK based on the deal. Also, we don’t expect the acquisition to have an impact on the firm’s wide moat rating, but the added drug helps to expand GSK’s late-stage pipeline.

Camlipixant has posted favorable phase 2 data supporting peak annual sales of over $500 million if confirmatory phase 3 studies replicate earlier studies. The drug reduced cough frequency by close to 34% in a phase 2 study with a largely favorable side effect profile. However, a taste disturbance arose in close to 5% of patients, which is partly concerning given lower severity of chronic cough. Nevertheless, with over 6 million people with refractory chronic cough in the developed market, the potential for the drug could be very large. Further, GSK’s strong position in respiratory disease should enable solid uptake of the drug if phase 3 studies post favorable data during 2024-25.

On the competitive side, Merck is working on additional analysis for its cough treatment gefapixant, which will likely be resubmitted to the U.S. Food and Drug Administration soon to address an initial complete response letter received in early 2022. With a similar mechanism of action as camlipixant targeting the P2X3 pathway, gefapixant has shown cough reduction as high as 37% in a phase 2 study, but only 15%-18% in the more important phase 3 studies. Merck holds a likely first-mover advantage, but if GSK can replicate the strong efficacy of camlipixant in phase 3 studies then GSK would likely hold the best-positioned drug in the class.