Glaxo Seeks Vaccine Approval

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GlaxoSmithKline (GSK) recently announced that it has submitted a Marketing Authorisation Application to the European Medicines Agency for its cervical cancer vaccine, Cervarix. Glaxo is looking to get a two-dose schedule of Cervarix approved for use in girls between 9 to 14 years for the prevention of premalignant genital lesions including cervical, vulvar and vaginal, and cervical cancer causally related to certain oncogenic Human Papillomavirus types.

Currently, a three-dose schedule of Cervarix is approved in the EU for the above mentioned indication in girls above 9 years.

We note that Glaxo boasts of a strong vaccine portfolio, which includes vaccines like Infanrix/Pediarix, Rotarix, Synflorix and Cervarix. Glaxo has a strong vaccine segment, which generated sales of £786 million in the second quarter of 2013, almost 12% of the total product sales of the company.

Glaxo currently holds a Zacks Rank #3 (Hold). The biggest near-term challenge for Glaxo will be to replace the revenues that will be lost to generic competition. Products like Valtrex, Lamictal, Imitrex, Requip, Combivir and Epivir are already facing declining sales due to intense generic competition. Going forward, a major part of Glaxo’s revenues will be exposed to generic competition, as products like Pandemrix and Prepandrix are all scheduled to lose exclusivity in the next few quarters.

We believe that the pipeline at Glaxo must deliver to counter the generic threat. We are impressed by Glaxo’s growth-by-acquisition strategy to combat the loss of revenues due to genericization of key products.

Meanwhile, stocks such as Actelion (ALIOF), Biogen Idec (BIIB) and Gilead Sciences, Inc. (GILD) currently look more attractive in the pharma space with a Zacks Rank #1 (Strong Buy).

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