Company Analysis - GlaxoSmithKline
In the pipeline..
GSK's principal products are set out into 9 therapeutic areas, with respiratory products creating the greatest turnover at £4995m in 2006, down from £5054m in 2005. However, total turnover in the same year grew by 9% to £23.2billion, with pharmaceuticals also up 9% to £20.1billion.
As it stood in February 2007, GSK's pipeline included 158 projects in clinical development, compared to 149 in February 2006, and 118 following the merger in 2001 - a clear pipeline progression. It has 31 major products in Phase III development or in the process of registration, spanning all major areas of development, including pazopanib for the prevention of tumour growth, lymphostat-B for lupus and ambrisentan for hypertension. In the last 12 months, many major NCEs and vaccines were filed for approval, and Cervarix has been approved in Australia, the EU and the US.
GSK clearly has great confidence in Cervarix, as demonstrated in January with the announcement that it was to initiate a seemingly make-or-break, head-to-head study of the HPV vaccine against Merck's version, Gardasil. This randomized, US Phase III trial in over 1000 18-26 year old women with type 16 or 18 HPV will compare the immunogenicity profiles of Cervarix with Gardasil, demonstrating how the 2 vaccines differ with respect to inducing strong and sustained immune responses in women appropriate for vaccination. This is a bold step for GSK, which is clearly confident the results will fall in its favour; however, should this not be the case, GSK may well have jeopardized the future revenue of its product. If Cervarix stands up to this test, it may go on to dominate the cervical cancer market, which as this form of cancer is the second most frequently ocurring form in women, should generate significant revenue for the company.
Earlier this year another milestone was reached in GSK's extensive portfolio; Tykerb (lapatinib ditosylate) was approved for use in combination with Roche's chemotherapy drug, Xeloda (capecitabine), for the treatment of patients with advanced metastatic HER2- expressing breast cancer who have received prior therapy with an anthracyline, a taxane and Herceptin (trastuzumab). As the first targeted, once-daily oral treatment for breast cancer, Tykerb "is a step forward in making new treatments available for patients who have progression of their breast cancer after treatment with some of the most effective breast cancer therapies available", said Steven Galson, MD, Director of the FDA's Center for Drug Evaluation and Research. In offering an alternative treatment option where the blockbuster Herceptin has failed, GSK's Tykerb looks set to become an indispensable weapon in the treatment of advanced breast cancer, thus generating revenue of blockbuster proportions.
With such positivity surrounding its late-stage compounds, it seems almost inevitable that GSK should receive a dramatic blow. Indeed, this appears to have occurred, with the recent news that it's second bestselling candidate, Type II diabetes therapy Avandia (rosiglitazone maleate), could increase the risk of heart attacks. This aminopyridine antihyperglycaemic agent was first launched in the US in 1999, and due to an immensely successful trial in which Avandia cut the risk of developing diabetes by 62%, it was thought that it could potentially add US $1.4billion to sales of the drug if prevention data was included on the label. However, following the emergence of a meta-analysis of 42 of GSK's Avandia trials, which concluded that Avandia may raise the risk of heart attack by 43% and increase the risk of death by all cardiovascular causes by 64%, Avandia's future success now remains in dispute. As the analysis' author admits, the data has significant limitations and it is not conclusive, and has been subsequently heavily disputed by GSK. But the FDA is currently reviewing the safety concerns, and analysts at Deutsche Bank have already predicted a 35% fall in Avandia sales driven by the negative publicity. The future of Avandia and a potential significant loss of revenue remain dependent on the ongoing FDA analysis. With GSK's confidence in the excellent safety profile of its compound, as demonstrated by a number of its long-term Phase III trials, it is hoped that Avandia will not meet the same fate as the former blockbuster, Vioxx.
With such a strong late-stage pipeline, GSK expects to launch 4 new major pharmaceutical products in the next year, and with plenty more registrations imminent in the coming years, the company is set to further its stake in the pharmaceutical market. However, with this large number of expected launches, there must also be a strong preclinical and early stage pipeline to represent potential candidates for future clinical success. Again, it is JP Garnier's business strategy that looks to be ensuring ongoing strength in this area. Garnier ensures the growth of GSK's pipeline not only through its own R&D but also by that of others, identifying strategic inlicensing opportunities to progress into late-stage development. Giving smaller companies the muchneeded financial boost to develop the compounds, Garnier works to build on future revenue with promising products. Examples include Genmab's HuMax-CD20 (ofatumab) and Akros/Japan Tobacco's preclinical MEK inhibitor, JTP-74057, both of which were among the many drugs licensed by GSK in the past year (see graph 1). The company also has 53 preclinical candidates, helped by the licensing of Kissei's KGA-2727 and Galapagos' GT-387 and GT-745 (see graph 2 and table 1).
