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GlaxoSmithKline (GSK - Analyst Report) recently announced disappointing top-line results on its phase III type 2 diabetes candidate, albiglutide. The phase III Harmony 7 study evaluated the efficacy and safety of albiglutide in patients with type II diabetes. The 32 week study compared albiglutide with Novo Nordisk’s (NVO - Analyst Report) Victoza (liraglutide). Both belong to the glucagon-like peptide-1 (GLP-1) agonist class. The candidates were compared on the basis of reduction in HbA1c, an indicator of glucose level in the blood.

The study failed to meet its primary endpoint of showing non-inferiority to Victoza, although albiglutide did show a statistically significant reduction in HbA1c from the baseline. Results showed that the reduction in HbA1c for albiglutide and Victoza was 0.78% and 0.99%, respectively. The rate of weight loss was lower in the albiglutide arm. Meanwhile, Glaxo reported that gastrointestinal tolerability was the most common side effect observed in the study. Nausea and vomiting rates were lower in patients receiving albiglutide as compared to Victoza.

It is noteworthy that Victoza has to be taken daily, while albiglutide is being developed as a once weekly treatment, which could lead to improved patient convenience and compliance.

Albiglutide is being investigated in 8 phase III studies named Harmony 1 to Harmony 8. These studies are assessing the efficacy, safety and tolerability of albiglutide as a single and combination therapy in patients with type 2 diabetes. Harmony 7 was the first study to be concluded and detailed data will be presented at a scientific meeting in 2012. While one study is expected to complete in late 2011, another will end in 2012. The remaining five studies are expected to complete by early 2013. An update on the program should be available in mid 2012.

Our Recommendation

We currently have a Neutral recommendation on Glaxo. The stock carries a Zacks #3 Rank (hold rating) in the short run. While several products in Glaxo’s Pharmaceuticals segment are facing generic competition, the Consumer side of the business is performing well and should help drive top-line growth. Moreover, Glaxo’s diversified base and presence in different geographical areas should help support revenue growth. Meanwhile, Glaxo’s restructuring initiative should help offset the impact of increasing generic competition in the next few years and help earnings grow faster than revenues. Share buybacks should also drive bottom-line growth.

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