GSK’s $10.6bn cancer deal will lead to more

{"text":[[{"start":4.95,"text":"For the enterprising pharma giant, it can be hard to branch out into new ailments and treatments. Internal R&D teams aren’t assembled overnight. And snapping up rivals’ drugs only works if one knows enough to pick the right horses, and has the scale to squeeze more sales out of them. GSK’s $10.6bn acquisition of cancer biotech Nuvalent shows the UK drugmaker has finally reached that point in the huge growth area that is oncology. "}],[{"start":31.849999999999998,"text":"The deal, GSK’s largest biotech acquisition since it was created in 2000, has the makings of a success. For one thing, Nuvalent’s lung cancer drugs have the potential to offer something new: a treatment that is both well tolerated and effective. That’s in contrast to the company’s last major oncology deal, the $5.1bn acquisition of Tesaro in 2019, which gave GSK a toehold in a class of targeted cancer drugs already dominated by AstraZeneca. "}],[{"start":62.05,"text":"And GSK can, reasonably, make the numbers stack up. To justify the $3bn premium it has paid, it needs to squeeze about $300mn of extra cash from Nuvalent. That doesn’t look implausible. Nuvalent’s standalone peak sales are projected at $4bn, according to Bernstein. Given GSK’s own global footprint, adding perhaps 10 per cent is reasonable: it plans to market Nuvalent’s drugs in China, where air pollution and smoking have resulted in high demand for lung cancer treatments. Meanwhile, GSK is unlikely to need all of Nuvalent’s roughly $350mn expected annual R&D spend."}],[{"start":102.3,"text":"All this is possible because GSK now has something it lacked a few years ago: a sizeable oncology business. Not including Tuesday’s deal, GSK had spent about $8bn buying three oncology-focused biotechs since 2019. Those investments have helped grow the segment from a $230mn business in 2019 into one generating almost $2bn in annual revenue, or roughly 6 per cent of group sales last year. "}],[{"start":null,"text":"

"}],[{"start":129.8,"text":"Having scale in a specific sector matters because the larger the franchise, the more specialised researchers a company has, the better it becomes at developing its own molecules and identifying more promising biotechs to snap up, and then marketing the treatments across the world. "}],[{"start":146.5,"text":"There’s no reason to think GSK will stop here either. Factoring in Tuesday’s deal, Lex calculates that the company still has more than £10bn of firepower before its net debt reaches three times this year’s forecast ebitda, a reasonable level in the sector. Building on this dealmaking streak would certainly be in keeping with GSK’s strategy of building its pipeline as fast as possible: it is targeting an extra 25 per cent of sales by 2030. "}],[{"start":175.25,"text":"The market doesn’t as yet believe it can get there. But pharmaceutical pipelines are not built in a straight line. Instead, one step up makes the next one more likely and more logical. "}],[{"start":192.55,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781066092_4088.mp3"}