Glaxo faces sales slide as No.2 drug hit

By Ben Hirschler, European Pharmaceuticals Correspondent

LONDON (Reuters) - It was the last news GlaxoSmithKline Plc needed.

Last month, U.S. prescriptions of the company's second biggest-selling drug, Avandia for diabetes, increased 6 percent after a difficult period of lacklustre growth and past manufacturing problems.

But an article on Monday in the prestigious New England Journal of Medicine by one of the world's top cardiologists suggesting the medicine increased the risk of heart death by 64 percent and the risk of heart attack by 43 percent will throw that positive trend into reverse.

Just how serious the damage is remains to be seen.

One immediate fear was it could lead to the drug being withdrawn from the market. But Ben Yeoh of Dresdner Kleinwort said the lack of similar safety problems seen in long-term trials -- including a major one focused on cardiovascular risks -- made this unlikely.

He was also encouraged by the fact Glaxo had already submitted its own pooled, or meta, analysis on Avandia to regulators last year, suggesting they could have taken draconian action then if they thought it was necessary.

"I don't think the FDA (Food and Drug Administration) will be withdrawing the drug," he said. "But there may be some strengthening to the label and there's obviously going to be some flattening of sales."

Tim Anderson of Prudential Equity agreed, but added that the negative article would have a material impact on sales, especially after other recent concerns linking the medicine to increased fracture risk.

SHARES TUMBLE

Glaxo shares ended the day down 5 percent and were off 8 percent by early afternoon in New York trade.

The FDA said it had not confirmed the significance of the risks reported in the New England Journal study and FDA official Dr. Robert Meyer noted other data contradicted those findings.

With sales of 1.6 billion pounds ($3.2 billion) in 2006, Avandia accounts for 7 percent of group revenues, making it a "cornerstone" of Glaxo's business, according to Nomura Code Securities analysts Paul Diggle.

Glaxo is relying on Avandia and asthma treatment Advair -- its biggest seller -- to keep driving the business while a raft of new products are delivered down its development pipeline.

Ironically, Monday's Avandia bombshell came on the same day as Glaxo received some good news about one of its new product stars, with Australia becoming the first major market in the world to approve its cervical cancer vaccine Cervarix.

The latter is tipped as a future multibillion-dollar-a-year seller, along with recently launched breast cancer drug Tykerb, which Glaxo plans to showcase at a U.S. medical meeting and a special oncology day for investors next month.

Chief Executive Jean-Pierre Garnier -- who retires in a year's time -- is staking his legacy on getting new products to market, arguing last month that momentum was building, with 10 new drugs filed, approved or launched in the first quarter.