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It’s fair to say that in GlaxoSmithKline (GSK) circles at least, eyebrows must have been raised when the world’s biggest vaccine manufacturer by sales, was not chosen to be involved in the Oxford University vaccine that has since become known, worldwide, as the AZ covid vaccine.

The Glaxo/AstraZeneca (AZN) tussle for top spot as the UK’s flag carrier when it comes to excellence in life science had always appeared to be more heavily-weighted in Glaxo’s favour. Until the covid vaccine came along, that is.

If the pandemic had happened just seven years ago, the “AZ jab” as Boris Johnson and co now like to call it, would certainly have had Glaxo’s name on it.  Back then the notion that AstraZeneca would even still be a major player in the industry in 2021 would have seen as less than certain. An ongoing battle with lapsing drug patents saw it falling from favour fast. An opportunistic £55-a-share bid by US rival Pfizer back in 2014 left it fighting for its survival and in October 2012, AstraZeneca’s market value stood at £36.6 billion, just over half of Glaxo’s £70.9 billion. Now it is one of the UK’s most valuable companies by market capitalisation, worth over £100 billion against Glaxo’s £69.6 billion.

Today the AZ name will be reverberating around many parts of the world, with the Oxford/AstraZeneca vaccine seen as one of the lights at the end of the interminable pandemic tunnel. Meanwhile Glaxo shines less brightly.

Back in October Glaxo revealed that it had seen sales slide as a result of the pandemic. Down 5% on an underlying basis in the third quarter, sales came in at £8.6 billion, as lockdowns, school closures and patients fearful of walking into their doctor’s surgery had repercussions on - ironically - Glaxo’s vaccines business most of all.

Iain Mackay, Glaxo’s chief financial officer, said the operating margin at its vaccines business was 500 basis points lower at 44.2% in the third quarter of 2020, “primarily reflecting the negative operating leverage from COVID-19-related sales decline and investment behind key brands such as Shingrix.”

The sale of its travel vaccines Rabipur and Encepur in December 2019 though has proved to be very well timed in light of the ongoing disruption to travel. While on the flip-side, the non-existent cough and cold season so far has hit performance in Glaxo’s respiratory health division.

Glaxo though is far from yesterday’s news. Mid-way through a company-wide turnaround, it could have done without a pandemic getting in the way, but it is still ploughing ahead anyway. Its latest move has seen it venturing into a new field of medical biology with a substantial investment in Adrestia Therapeutics, a Cambridge biotech start-up that aims to restore health by rebalancing genetic activity in patients.

As part of the deal, Glaxo will co-lead a Series A funding round for Adrestia and enter a long-term drug discovery collaboration that could yield as much as £860 million in milestones and royalties for the company.

The closely-linked paths of Glaxo and its long-time competitor AstraZeneca are still evident even here though. Adrestia was founded in 2018 by Cambridge biology professor Steve Jackson. Prof Jackson’s earlier biotech company KuDOS developed one of the first treatments using synthetic lethality, the cancer drug now sold by AstraZeneca as Lynparza.

But Glaxo has a very clear path of its own laid out, as part of this company revamp under chief executive Emma Walmsley. The merger with Pfizer which has boosted its consumer healthcare business and the separate but equally important oncology division, which has been bolstered by the acquisition of TESARO for $5.1 billion and tie-up with Merck to the tune of 3.6 billion Euros, means Glaxo is carrying more debt, but has clear ambitions to retain its position as an innovative and world-class leader in pharmaceuticals. Then there is its work in Covid vaccine research, which having cost many millions of pounds already, is likely to see the Glaxo name connected with at least one viable vaccine, sooner or later.

Glaxo may be looking a little down, compared to the likes of AZ right now, but it’s far from out, and Wednesday’s full year results and fourth quarter figures are more than likely to be set out with the intention of reminding investors - and the world - that GlaxoSmithKline is still very much a pillar of UK life science excellence.

More on GlaxoSmithKline

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Topics covered:

UK; Shares

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