GlaxoSmithKline: Avandia to stay
but damage is done
An FDA advisory committee has
recommended that GlaxoSmithKline's diabetes treatment Avandia should remain
available on the US market, albeit with stronger health warnings. Although the
company has avoided the more negative impact of a market withdrawal, the
future competitiveness of the franchise has been put into doubt.
Although not a prerequisite, the FDA follows the advice of its advisory
committees in the majority of cases. The FDA had called for an advisory panel
to assess the safety risks and benefits of Avandia (rosiglitazone) following
the publication of clinical study analysis in May which suggested that use of
the treatment was linked to a 43% increased risk of heart attack.
The immediate impact of the ruling was a 3.4% gain for GlaxoSmithKline's share
price on the London Stock Exchange, while the company sought to address short
term shareholder concerns by confirming its 2007 earnings outlook. In the
medium to long term, however, it would appear that the sales growth potential
of Avandia has been blunted, despite the 'worst case' scenario of market
withdrawal having been avoided.
It looks extremely likely that the FDA will issue Avandia a 'black box'
warning as a result of the advisory panel recommendation, a regulatory burden
that will limit the ability of GlaxoSmithKline's product to compete with
Takeda's rival glitazone product Actos (pioglitazone) and newer diabetes
treatments such as Merck & Co.'s Januvia (sitagliptin).
The competitive dynamic of Avandia vis-a-vis Actos could be particularly
damaging for GlaxoSmithKline; prior to the safety scare, Avandia commanded a
51% share of the US market for glitazone diabetes treatments, with Actos
accounting for the remaining 49%. However, by July, Avandia's share had fallen
to 33% with Actos' share having risen to 67%.
Crucially, at this stage, there is no evidence to suggest that Actos is linked
to a similar increase risk of heart attack and Takeda has moved quickly to
assure both healthcare professionals and patients that its drug has a proven
safety record. The FDA is likely to assess clinical studies of Actos to verify
these claims as part of its continued studies surrounding Avandia.
Retention of Avandia's presence on the US market is a positive for
GlaxoSmithKline. Nevertheless, the product was forecast to be one of the
company's key sales growth drivers out to 2012. Clearly, the growth potential
of the franchise will be significantly diminished should Takeda's Actos
successfully retain its recently enhanced share of the glitazone market.
Furthermore, there remains considerable doubt as to whether GlaxoSmithKline's
late stage pipeline can deliver sufficient sales growth to counter anticipated
declining sales from its currently marketed portfolio as patent expiries and
generic competition intensifies at the end of the decade. The weakened
position of Avandia will only serve to heighten these fears among
shareholders.
Related research:
Metabolic Endocrinology - Type I Diabetes Drug Pipeline Report
Metabolic Endocrinology - Type II Diabetes Drug Pipeline Report
