Glaxo’s Drug Approvals Boost Morale as China Probe Drags

GlaxoSmithKline Plc’s recent setbacks, including a corruption probe in China, are being outweighed by what will probably be the highest number of new drug approvals in the U.S. this year.

Glaxo and partner Theravance Inc.’s lung drug Anoro this week won the backing of a U.S. advisory panel, which augurs regulatory approval by December. A nod for Anoro by the Food and Drug Administration would be Glaxo’s fifth this year. It’s unlikely any other major drugmaker globally will come close, said Sam Fazeli, an analyst at Bloomberg Industries in London.

The stock has gained 22 percent this year, even as Glaxo faces allegations of bribery in China and the FDA proposed a simpler route for companies seeking to copy its best-selling medicine. The drug, Advair, had about $8 billion in revenue last year. Glaxo’s share surge compares with a 9.3 percent decline last year, the worst performance among the world’s 10 biggest drugmakers.

“The morale across a lot of GSK is very strong, because we’ve had a very exciting period of pharmaceutical innovation,” Chief Strategy Officer David Redfern said in an interview this week. “We’re pretty proud of what we’ve achieved.”

Approvals were granted this year for Tivicay for HIV, Tafinlar and Mekinist for skin cancer, and Breo for respiratory disease. The FDA review period for albiglutide, a once-daily treatment for Type 2 diabetes, has been extended by three months to April 15, Glaxo said last month.

Pending Trials

Analysts have also been anticipating results from clinical trials on two experimental drugs: the cancer vaccine MAGE-A3 and darapladib for heart disease. Glaxo said last week that MAGE-A3 failed to benefit skin-cancer patients in a late-stage trial. Glaxo will continue to study whether the drug works in a subgroup of patients and also in lung cancer. Results on darapladib, a potential blockbuster, will be released this year.

Anoro and Tivicay have combined sales potential of about $7 billion, compared with slightly more than $1 billion for all China drug revenue last year, said Mark Clark, an analyst at Deutsche Bank in London.

“The upside vastly outweighs any short-term hiatus in China,” Clark said in a telephone interview. “Clearly, revenues will be under pressure for a few quarters in China, but I’m not overly vexed about this.”

Chinese Market

The China probe has led to the detention of senior executives and the appointment of a new China head for the company. Glaxo is considering withdrawing from the China market as it negotiates with the government on how to resolve the bribery allegations, the U.K.’s Daily Telegraph reported last week. The BBC cited the risk of accepting corporate liability in China, resulting in large fines in the U.K. and the U.S., which have anti-bribery laws that apply to foreign practices of companies operating in those countries.

“We remain fully committed to China and to continuing to supply our health-care products to meet the needs of patients in the country,” Glaxo spokesman Simon Steel said by e-mail today.

Glaxo has the largest research and development presence of any multinational drugmaker in China and is unlikely to pull out, Clark said.

“You can’t ignore a population that large,” he said. “They’ll take whatever punishment is coming and get on with it.”

In July, Christophe Weber, head of Glaxo’s vaccines unit, said the company was in discussions to form a joint venture with a Chinese company to help with research and marketing in the country. Spokesman David Daley declined to say whether the talks were ongoing or have been put on hold.

Before it's here, it's on the Bloomberg Terminal.