NEW YORK (TheStreet) -- Dutch pharmaceutical company Prosensa (RNA) and GlaxoSmithKline (GSK - Get Report) announced their joint venture to develop an experimental muscular dystrophy drug, drisapersen, failed a phase III clinical trial.
It was hoped the drug would treat Duchenne Muscular Dystrophy (DMD), a neuromuscular disease which affects up to 1 in 3,500 male births. DMD causes loss of muscle function in sufferers, often resigning them to wheelchairs before 12.
"While we are disappointed that this study did not meet its primary endpoint, we remain committed to the overall program and will continue to work closely with GSK," Prosensa CEO Hans Schikan said in a company statement.
Carlo Russo, Senior Vice President, Biopharm Development at GSK, added the companies will evaluate the outcome of the study "to help inform our next steps."Sarepta Therapeutics (SRPT - Get Report) is currently developing a rival drug to treat DMD. Prosensa shares plummeted 70% and GSK shares were flat as of 3:20 p.m. EST. Shares of Sarepta surged 25% to $44.42. TheStreet Ratings team rates GSK as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation: "We rate GSK a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its expanding profit margins, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for GSK is currently very high, coming in at 71.13%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.65% trails the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- GSK's earnings per share declined by 13.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, GSK reported lower earnings of $2.94 versus $3.21 in the prior year. This year, the market expects an improvement in earnings ($3.57 versus $2.94).
- GSK, with its decline in revenue, slightly underperformed the industry average of 3.9%. Since the same quarter one year prior, revenues slightly dropped by 3.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Pharmaceuticals industry and the overall market, GSK's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: GSK Ratings Report
Written by Keris Alison Lahiff.