Bloomberg News

Glaxo Declines as FDA Clears Path for Advair Rivals

September 10, 2013

GlaxoSmithKline Plc (GSK) fell the most in more than two months after U.S. regulators proposed a simpler route for rivals seeking to copy the company’s Advair respiratory drug, threatening almost $8 billion in revenue.

Glaxo declined 2.5 percent, the biggest drop since June 20, to close at 1,598.50 pence in London, where the company is based. The stock has gained 24 percent this year including reinvested dividends, compared with a 19 percent return in the Bloomberg Europe Pharmaceutical Index.

The Food and Drug Administration yesterday revised guidelines for competitors to get copies on the market, saying long, expensive human tests aren’t required to show drugs work the same as Advair. Advair, an inhaled medicine for asthma and chronic obstructive pulmonary disorder, is the world’s third-best selling drug with revenue of 5.05 billion pounds ($7.95 billion) last year and accounts for about 20 percent of Glaxo’s annual sales.

“The vast majority of analysts have assumed that ‘true’ generic versions of Advair would not likely launch in the U.S.,” Tim Anderson, an analyst at Sanford C. Bernstein & Co., said in a note to clients after the FDA statement. “This new draft guidance document suggests otherwise.”

Glaxo, and until now the FDA, have said that the same drug in a different inhaler is a different product because the device used to administer the medicine can cause dosing to vary. While the patent on Advair expired in 2010 in the U.S., a separate patent on the Diskus device remains in force through 2016.

Size, Shape

The FDA’s guidance yesterday laid out the characteristics that an inhaler should have, including a similar size and shape to Diskus. Those guidelines will rule out some generic devices, and suggest that those developed by Vectura Group Plc (VEC) and Orion Oyj will qualify, according to Sam Fazeli, an analyst at Bloomberg Industries in London. The guidance may mean a few “substitutable” generics -- where a pharmacist can switch an Advair prescription for a generic -- will reach the market in late 2014 or in 2015, Fazeli said in a report today.

“Patents relating to the Advair device run until mid 2016,” Glaxo said in an e-mailed statement today. “In addition, we believe the manufacture of combination respiratory medicines such as Advair presents significant hurdles and remains extremely challenging.”

Novartis AG (NOVN)’s generics division, Sandoz, probably will be the first in getting an Advair copy to the market, followed by Actavis Inc. (ACT:US) and Mylan Inc. (MYL:US), according to Bernstein.

Public Comment

“With respiratory drugs it’s difficult to know how much is actually getting into your lungs,” said Mark Purcell, an analyst at Barclays Plc (BARC) in London. “So the FDA was trying to reconcile that. It’s a big step forward for other companies not to have to come up with complicated experimental ways to try to prove equivalence.”

The FDA guidelines are now subject to public comment, and Glaxo will continue to weigh in, the company said today.

Glaxo is introducing two new products in anticipation of an Advair generic. Glaxo’s Breo Ellipta received an FDA nod in May while the agency will hold an advisory committee meeting today on a new type of drug called Anoro. An FDA clearance of Anoro would add 919 million pounds in sales in 2017 for Glaxo, according to the average of nine analysts’ estimates compiled by Bloomberg. A decision is scheduled for December.

Competitors have also been racing to introduce new medicines in the $10 billion market to treat lung ailments. Novartis and Almirall SA (ALM) have won regulatory approval recently for their respiratory treatments.

AbbVie Inc. (ABBV:US)’s Humira and Johnson & Johnson (JNJ:US)’s Remicade, which both treat arthritis, are the only medicines with greater worldwide sales than Advair.

To contact the reporters on this story: Trista Kelley in London at tkelley2@bloomberg.net; Makiko Kitamura in London at mkitamura1@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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Companies Mentioned

  • ACT
    (Actavis plc)
    • $217.45 USD
    • -1.23
    • -0.57%
  • MYL
    (Mylan Inc/PA)
    • $51.74 USD
    • -0.16
    • -0.31%
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