UPDATE 1-Glaxo shares climb as U.S. panel backs Avandia

(Adds Glaxo comment, more analysts, legal cases, Takeda drug)

LONDON, July 31 (Reuters) - Shares in GlaxoSmithKline Plc GSK.L, Europe's biggest drugmaker, gained more than 3 percent on Tuesday after a U.S. advisory panel recommended its diabetes pill Avandia should stay on the market.

Even though data suggested Avandia may increase the risk of a heart attack for some patients, panel members voted 22-1 to keep the medicine on sale -- but most advisers backed stronger warnings on the widely used drug.

The safety of Avandia, Glaxo’s second-best-selling drug, with global sales of 1.6 billion pounds ($3.24 billion) last year, came into question in May, when a U.S. analysis linked it to a 43 percent higher chance of having a heart attack.

That triggered a plunge in prescriptions, and some investors feared the drug would be pulled from the all-important U.S. market. Worldwide sales in the three months to June dropped to 349 million pounds from 477 million a year earlier, the company reported last week.

Monday’s panel decision is expected to keep Avandia a blockbuster product, albeit with lower sales than in the past. Morgan Stanley analysts estimate sales of 1.2 billion in 2010.

“Avandia won’t get back to where it was but this is certainly going to help stabilise the prescription decline and, once we know which patients are at higher risk than others, then I think Glaxo will be able to grow sales again,” said Navid Malik, an analyst with Collins Stewart.

The U.S. Food and Drug Administration (FDA) usually adopts the recommendations of advisory panels, which are groups of experts from outside the agency.

Glaxo shares were up 3.1 percent at 12.53 pounds by 0855 GMT, among the biggest gainers in London FTSE-100 index of leading companies, after a high of 12.83.


A Glaxo spokesman said the British-based group was maintaining its forecast for 2007 growth in earnings per share of 8 to 10 percent at constant currencies, although there was still uncertainty about future Avandia sales.

Analysts said tougher warnings on Avandia could play into the hands of Takeda Pharmaceutical Co. Ltd.'s 4502.T rival oral diabetes drug Actos.

The Japanese company earlier on Tuesday booked a 5.1 percent rise in quarterly profit, helped by a jump in Actos sales due to Avandia’s woes.

Industry analysts said the recommendation to keep Avandia on the market, if endorsed as expected by the FDA, would reduce the likelihood of successful liability lawsuits against Glaxo.

Several suits have already been filed in the United States by patients or their families claiming damages following heart attacks. Glaxo said it would defend itself against such claims, arguing Avandia is safe and effective when used appropriately.