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Good news recently flowed in at GlaxoSmithKline (GSK - Analyst Report) when the joint advisory committee (comprising Endocrinologic and Metabolic Drugs Advisory Committee and the Drug Safety and Risk Management Advisory Committee) to the US Food and Drug Administration (FDA) voted in favor of easing safety restrictions related to its type II diabetes drug, Avandia (rosiglitazone).

Of the 26-member panel, 13 voted in favor of modifying and 7 in favor of removing the Avandia Risk Evaluation and Mitigation Strategy (REMS) program. However, 5 members voted in favor of continuing the REMS and one recommended removal of Avandia from the US market.

A final decision from FDA on Avandia label is expected in the forthcoming months. Although the FDA is not bound to accept the recommendation of the advisory panel it does pay heed to its recommendation.

We note that the Avandia label restricts use of the drug in patients already receiving Avandia and in patients who experienced inadequately benefit with currently approved diabetes drugs and have decided not to take Actos (pioglitazone).

We remind investors that Avandia came under the FDA scanner in 2007 after an article in the New England Journal of Medicine (NEJM) linked the use of Avandia with increased risk of cardiovascular events. Following the report Glaxo revised the US label on Avandia.

In 2010, the European Medicines Agency (EMA) banned Avandia, while the FDA severely restricted the use of the drug. Annual sales of Avandia have fallen drastically to £6 million (in 2012) from £1.6 billion in 2006.   

We note that Avandia patents have already expired in the US. We believe that even if the FDA takes a positive stance on the Avandia label, with major players like Sanofi (SNY - Analyst Report) and Novo Nordisk (NVO - Analyst Report) already in the diabetes market, Avandia sales are not likely to increase significantly.

We note that Glaxo’s product portfolio was boosted recently with the approvals of two melanoma drugs, Tafinlar (dabrafenib) and Mekinist (trametinib) and chronic obstructive pulmonary disease drug, Breo Ellipta. Moreover, Glaxo boasts of a robust pipeline. A number of pipeline-related news is expected in the coming quarters. We believe that the pipeline at Glaxo must deliver to combat the generic threat faced by the key drugs of the company.

Glaxo carries a Zacks Rank #3 (Hold). Companies that currently look attractive include Santarus, Inc. , which carries a Zacks Rank #1 (Strong Buy).

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