Glaxo and Theravance Suffer Setback

GlaxoSmithKline (NYSE:GSK - News) and Theravance, Inc. (NasdaqGM:THRX - News) recently announced top-line data from pivotal phase III studies conducted with pipeline candidate, Relovair, for chronic obstructive pulmonary disease (“COPD”) and asthma. Relovair is a combination of fluticasone furoate and vilanterol.

In the two COPD studies, Relovair reduced the annual rate of moderate-to-severe exacerbations (worsening of severity of disease) compared to vilanterol. However, in the second study, the reductions were not statistically significant at the highest dose.

Relovair was associated with side-effects, such as nasopharyngitis, upper respiratory tract infection, oral candidiasis, headache, COPD, back pain, pneumonia, bronchitis and sinusitis. The candidate was also associated with fatal pneumonia at one dose.

In the asthma studies, Relovair showed an encouraging efficacy profile but was associated with several side-effects, like headache, nasopharyngitis, upper respiratory tract infection, bronchitis, cough, oropharyngeal pain and influenza.

Meanwhile, both Glaxo and Theravance are confident about Relovair’s prospects and feel that the results are adequate for filing. Glaxo plans to submit marketing applications to the regulatory bodies in the US and Europe in mid-2012 for the COPD indication.

For the asthma indication, the company plans to seek EU approval in mid-2012. Glaxo remains in talks with the FDA on requirements for a filing for the asthma indication of Relovair.

Our Take

With the overall results being mixed, share prices of both Glaxo and Theravance reacted negatively to the news. Advair is one of Glaxo’s highest revenue earners, generating sales of almost $8 billion in 2010. Relovair, if approved, will be positioned as a replacement for Advair. In light of the mixed results from the studies, we remain cautious about the chances of Relovair gaining first-round approval. The FDA could ask the companies for additional data for the asthma indication.

We currently have Neutral recommendations on both Glaxo and Theravance. While Glaxo carries a Zacks #3 Rank (hold rating) in the short run, Theravance carries a Zacks #4 Rank (sell rating) in the short-term. Theravance has been in the news recently due to termination of its license, development and commercialization agreement with Astellas for its only marketed drug Vibativ.

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