Recently, GlaxoSmithKline (GSK) exercised its option to obtain exclusive license regarding further development and commercialization of ChemoCentryx’s Traficet-EN, a specific CCR9 antagonist. The drug candidate is meant for the treatment of inflammatory bowel diseases, including Crohn’s disease.
Under the terms of the agreement, ChemoCentryx will receive an option exercise fee of $35 million as well as milestone payments. In addition, on successful commercialization, ChemoCentryx will receive royalties on sales of the drug. Following the option exercise, Glaxo will be responsible for further development of Traficet-EN.
We believe Glaxo is strengthening its pipeline to meet the patent challenges in the forthcoming period. Several products like Valtrex, Coreg IR, and Requip are all facing declining sales due to intense generic competition. The entry of generic versions of Merck’s (MRK) Cozaar is likely to stunt sales of Coreg further. Going forward, a major part of Glaxo’s revenues will be exposed to generic competition as products like Advair, Combivir, Epivir, Relenza, Avandia, Avandamet, Boniva and Ziagen are all scheduled to lose exclusivity in the next few years.
Given the situation, Glaxo has made significant progress with its late-stage pipeline. We think Glaxo possesses one of the strongest late-stage pipelines among large-cap pharma players. The company’s main focus areas include biopharmaceuticals, immuno-inflammation, infectious diseases, metabolic pathways, neuroscience, oncology, ophthalmology and respiratory. Glaxo has a number of potential billion-dollar products for cardiovascular disease, oncology, pain management, vaccines, central nervous system disorders and gastrointestinal disease.
We believe that Glaxo remains interested in accelerating growth through acquisitions and partnering arrangements. The company has also been active in expanding its presence in emerging markets as evident by its deals with companies like Bristol-Myers Squibb (BMY) and Dr. Reddy’s Laboratories (RDY), among others. We are Neutral on the stock.
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