GlaxoSmithKline (GSK) and Tolerx recently presented disappointing results on their late-stage diabetes candidate. Otelixizumab, which is being developed for the treatment of type I diabetes, failed to achieve its primary efficacy end-point in the phase III DEFEND-1 study.
Glaxo and Tolerx, however, said that no new or unexpected safety concerns were observed. While Glaxo intends to continue evaluating additional dosage regimens with the candidate, patient recruitment and dosing in another phase III study, DEFEND-2, was suspended. Dosing and new recruitment in this study will remain suspended until the company finishes reviewing the DEFEND-1 results.
The late-stage failure is disappointing news for both Glaxo and Tolerx. The companies entered into a development and commercialization agreement for otelixizumab in October 2007. The agreement relates to the development of otelixizumab for several autoimmune and immune-mediated inflammatory diseases, including type I diabetes.
While Tolerx is responsible for the US development and approval of otelixizumab for type I diabetes, Glaxo has exclusive rights for the development and commercialization of otelixizumab for all other indications in the rest of the world. Glaxo also has the right to develop otelixizumab for the pediatric population in the US. Meanwhile, Tolerx has the option to co-promote otelixizumab with Glaxo for type I diabetes in the US.
We note that Glaxo’s diabetes franchise (Avandia products) has been under pressure over the past few years. In Feb 2011, the company announced a revision in the US prescribing information and medication guides for all rosiglitazone-containing medicines, which include Avandia, Avandamet and Avandaryl. The revised labels of these type II diabetes drugs are required to include additional safety information and restrictions on the use of these medicines.
In Sep last year, the US Food and Drug Administration (FDA) had asked Glaxo to set up a Risk Evaluation and Mitigation Strategy (REMS) program for patients taking this class of drugs.
Meanwhile, the European Medicines Agency (EMA), taking a far more stringent step, suspended the marketing authorization of all rosiglitazone-containing drugs in Sep 2010. Following the emergence of safety concerns related to the use of Avandia, GlaxoSmithKline’s Avandia franchise saw sales plunging to $682 million in 2010 from $2.4 billion in 2007. We expect Merck’s (MRK) Januvia/Janumet to benefit from the restrictions imposed on the Avandia franchise.
Glaxo also discontinued the development of a couple of phase III diabetes candidates – Avandamet XR (type II diabetes) and Avandia + statin (type II diabetes).
We currently have a Neutral recommendation on Glaxo, which is supported by a Zacks #3 Rank (short-term “Hold” rating).
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