GlaxoSmithKline plc (GSK) announced recently that the US Food and Drug Administration (FDA) has restricted the use of its type II diabetes drug Avandia (rosiglitazone), citing safety concerns. The use of other drugs, Avandamet and Avaglim, has also been restricted as they contain rosiglitazone.
The FDA plans to control the use of rosiglitazone containing drugs by introducing label additions. The regulatory body also wants a Risk Evaluation and Mitigation Strategy (REMS) program to ensure safety among patients taking the drugs.
Meanwhile, the European Medicines Agency (EMA), taking a far more stringent step, has suspended the marketing authorization of all rosiglitazone-containing drugs. The EMA plans to keep the suspension in place until data otherwise proves that the benefits of taking these medications outweigh risks. As a result of this suspension physicians will switch their patients to competing drugs, namely Takeda Pharmaceuticals’ Actos and Merck & Co. Inc.’s (MRK) Januvia.
Avandia is a thiazolidinedione anti-diabetic agent indicated as an adjunct to diet and exercise to improve glycemic control in adults with type II diabetes. The product first came under fire in 2007 when the New England Journal of Medicine published an analysis of studies conducted with people who had taken Avandia.
According to the analysis, a higher risk of heart attack was observed in patients taking Avandia compared to patients taking other diabetes drugs or no diabetes medication. Avandia’s label was revised to include a warning regarding the potential cardiovascular risk.
Following the emergence of safety concerns related to the use of Avandia, GlaxoSmithKline’s Avandia/Avandamet franchise saw sales plunging to $1.2 billion in 2009 from $2.4 billion in 2007.
In the near future, GlaxoSmithKline plans to halt the marketing of Avandia in all countries and work with the respective regulatory agencies of those countries to comply with decisions taken by the agencies regarding medicines with rosiglitazone.
We currently have a Neutral recommendation on GlaxoSmithKline, which is supported by a Zacks #3 Rank (short-term Hold rating). We view the regulatory decision on Avandia as a major negative given the fact that it will adversely affect the already dwindling sales of the drug.
However, the company’s diversified base and presence in various geographical areas should provide cushion against any top-line risk.
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