Glaxo's Avandia Backed by FDA - Analyst Blog

GlaxoSmithKline (GSK) received some good news recently when a joint advisory committee of the US Food and Drug Administration (FDA) voted in favor of keeping Avandia on the market.

All new and existing cardiovascular safety data on Avandia was reviewed at the joint meeting of the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee and the Drug Safety and Risk Management Advisory Committee.

Stronger Label Likely

About 20 committee members voted in favor of keeping the drug on the market with 12 voting in favor of its withdrawal. However, several committee members recommended the addition of stricter warnings and restrictions to the drug’s label.

The final decision as to whether Avandia should remain on the market will be taken by the FDA which usually follows the recommendation of its advisory committees even though it is not required to do so. We note that the FDA’s advisory committees had voted 22-1 in favor of keeping Avandia on the market the last time the committees met in 2007.

Avandia is a thiazolidinedione anti-diabetic agent indicated as an adjunct to diet and exercise to improve glycemic control in adults with type II diabetes. The product first came under fire in 2007 when the New England Journal of Medicine published an analysis of studies conducted with people who had taken Avandia.

According to the analysis, a higher risk of heart attack was observed in patients taking Avandia compared to patients taking other diabetes drugs or no diabetes medication. Avandia’s label was revised to include a warning regarding the potential cardiovascular risk.

Following the emergence of safety concerns related to the use of Avandia, GlaxoSmithKline’s Avandia/Avandamet franchise sales plunged to $1.2 billion in 2009 from $2.4 billion in 2007.

While the advisory committee’s recommendation comes as a relief for GlaxoSmithKline, we believe that Avandia will most likely be required to carry stricter labels. This should lead to a further decline in Avandia/Avandamet franchise sales.

Meanwhile, Avandia will be coming up for review in the EU as well where the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) will review the risk-benefit profile of the drug from July 19 – July 22.

Neutral on Glaxo

We currently have a long-term Neutral recommendation on GlaxoSmithKline. The consumer side of the business is performing well and should help drive top-line growth. Moreover, GlaxoSmithKline’s diversified base and presence in different geographical areas should help support revenue growth.

GlaxoSmithKline’s restructuring initiative should help offset the impact of increasing generic competition in the next few years and help earnings grow faster than revenues. While we remain concerned about the looming generic competition, we are pleased with GlaxoSmithKline’s progress with its late-stage pipeline.
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