The US Food and Drug Administration (FDA) recently announced the temporary suspension of GlaxoSmithKline’s (GSK) rotavirus vaccine, Rotarix, as it is contaminated by porcine circovirus 1 (PCV-1).

The virus was detected by the company itself as well as an independent research team. Glaxo said that PCV-1 does not multiply in humans and has not been known to cause illness in humans. Moreover, the virus is present in everyday meat products and has not been seen to cause any harm. While the FDA has recommended the temporary suspension of Rotarix in the US as a precautionary measure, a similar suspension of the vaccine has not been recommended by the European Medicines Agency (EMA) and the World Health Organization (WHO) for Europe and developing countries.

The FDA, however, specified that there is no evidence that there could be a safety risk associated with the use of Glaxo’s Rotarix, which gained approval in the US in 2008. The agency intends to hold an advisory committee meeting within 4-6 weeks where the data on Rotarix will be reviewed. The committee will provide a recommendation on the use of rotavirus vaccines in the US.

According to the FDA, rotavirus disease, which can cause severe diarrhea and dehydration, is estimated to be the cause of the deaths of more than 500,000 infants worldwide, especially in low- and middle-income countries.

The temporary suspension in the US will affect Rotarix sales which recorded revenues of £76 million in the US in 2009. Worldwide sales for the vaccine were £282 million in 2009. We expect competitor Merck (MRK) to benefit from the temporary suspension of Glaxo’s Rotarix. Merck’s rotavirus vaccine, RotaTeq, has been given a clean bill of health regarding the presence of PCV-1 and we believe patients will switch to RotaTeq for the time being.

We currently have an Underperform recommendation on Glaxo. Although Glaxo boasts of a diversified base and presence in different geographical areas, we remain concerned about the patent challenges being faced by several of its products. With several products expected to lose exclusivity and the swine flu opportunity likely to miss expectations, we expect Glaxo’s top-line to remain under pressure in the coming quarters.
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