Glaxo breathes easier as threat to Advair recedes

GlaxoSmithKline Plc’s (GSK.L) top-selling lung drug Advair is set to enjoy a longer lease of life than widely expected, due to the difficulties facing generic companies seeking to make cut-price copies.

Fears of competition to the 5 billion pounds-a-year ($8.1 billion) blockbuster have long overhung the shares, but a strategy update from Teva Pharmaceutical Industries Ltd (TEVA.O) suggests the threat is limited and not imminent.

Crucially, Teva believes the regulatory hurdles for winning approval for an inhaled drug such as Advair in the key U.S. market are so high it will not be possible to develop a generic copy that can be substituted for the original.

Instead, the world’s biggest maker of generic drugs told investors on Thursday it would work on a branded competitor that could be filed for U.S. approval in 2014, which analysts said suggested approval in 2016.

Glaxo shares were 2.3 percent higher by 1350 GMT on the news, outperforming a 1 percent advance in the European drugs sector .SXDP.

“The world’s top generic company has now admitted that there will be no rapid erosion of Advair by generics, which should assuage the fears of even the most skeptical fund manager,” said Citigroup analyst Kevin Wilson.

Teva’s strategy removes a key threat to Advair and follows a decision by Novartis AG’s (NOVN.VX) generics unit Sandoz in March to drop development of a generic version of Advair it was working on with Vectura Group Plc (VEC.L).

In Europe, Teva plans to file a generic form of Advair for approval in 2012, implying a launch in 2013 or 2014, which is two or three years later than some Glaxo investors had feared.

Overall, Teva expects respiratory products to contribute about $2.4 billion to its $31 billion revenue target for 2015.

VINDICATION

The latest news is a vindication for Glaxo Chief Executive Andrew Witty, who has always argued Advair will remain a major product, despite losing U.S. patent protection in 2011, because of the technical difficulties of making inhaled drugs.

Continued strong sales of Advair, which accounted for 18 percent of revenue in 2009, will give Witty an important buffer as he pushes to diversify the British-based drugmaker and secure new sources of revenue.

Lack of imminent generic competition could also help ease the transition to a new treatment for asthma and chronic obstructive pulmonary disease (COPD) that Glaxo is developing with Theravance Inc (THRX.O).

Glaxo recently gave a promising glimpse of its once-daily successor to Advair, called Relovair, which it expects to be the first next-generation combination respiratory medicine to reach the market.

It has started final-stage Phase III clinical testing of Relovair and analysts believe the drug could get to market by 2013, at which point the drugmaker will try to switch as many patients as possible to the new product.

($1=.6198 Pound)

(Editing by David Hulmes)