GSK climbs on setback for competitor’s drug

GlaxoSmithKline hit a two-month high on Tuesday after a setback for a competitor helped ease worries about the sustainability of its HIV business.

Gilead Sciences announced that final-stage trials of a drug that halts the spread of the HIV virus had met the primary endpoint of non-inferiority to GSK’s best-in-class treatment. However, Gilead’s results did not clear the higher bar of showing statistical superiority.

GSK’s Tivicay and Triumeq HIV drugs have taken market share from Gilead, which had a near monopoly before 2013, and generate worldwide sales of about $4bn a year.

Non-inferiority gives Gilead the chance to maintain and potentially rebuild share but does not provide enough of a competitive edge to be disruptive to ViiV, GSK’s HIV franchise, analysts said.

“ViiV remains one of the biggest growth drivers for GSK over 2016-20 and, as such, this competitive data set has been in focus for many investors,” said Goldman Sachs. “While today’s news means that Gilead will likely compete effectively in this market, we believe that is already incorporated in our and consensus estimates.”

GSK closed 1.8 per cent higher at £16.73 in a quiet wider market. The FTSE 100 ended down 0.3 per cent, or 21.12 points, at 7,526.51.

Mediclinic faded 3.2 per cent to 789.5p with JPMorgan Cazenove advising caution. “We still believe in the longer term structural outlook and ultimate earnings recovery but suspect weak guidance will temper near-term enthusiasm,” it told clients.

London Stock Exchange took on 1.5 per cent to £34.42 after revealing the $685m acquisition of Citi’s fixed-income indices and analytics business, which analysts saw as about 4 per cent accretive to 2020 earnings from cost savings alone.

Separately, Morgan Stanley was positive on LSE going into its June 12 investor day with the broker expecting new cost-cutting targets.

Sophos, the security software maker, took on 3.9 per cent to 454p after Shore Capital upgraded from “sell” to “hold”.

TalkTalk fell 5.5 per cent to 172.1p on the back of a Sunday Times column arguing that the broadband provider lacks the funds necessary to reverse market share losses.

Lonmin slipped 7.2 per cent to 80p after Peel Hunt cut the platinum miner to “sell” with a 70p target.

The need to keep cutting costs “raises real concerns that from here further cash conservation measures will start to have negative impact on the size and scale of the business”, Peel Hunt said.

In spite of forecasting higher platinum prices, it modelled for Lonmin to have fully drawn all of its remaining credit lines ahead of a 2020 debt maturity.

“Given the anticipated cash flow deficits, a further material equity raise looks likely over the next two years,” Peel Hunt added.