Glaxo/THRX Drug Closer to Approval

GlaxoSmithKline ( GSK - Analyst Report ) and Theravance, Inc. ( THRX - Analyst Report ) recently announced that the US Food and Drug Administration (FDA) has accepted the New Drug Application (NDA) for their candidate, FF/VI (proposed brand name Breo in the US and Relvar in the EU, formerly known as Relovair). The FDA is expected to render its final decision on the candidate by May 12, 2013.

FF/VI is a combination of fluticasone furoate (FF) and vilanterol (VI), administered using a dry powder inhaler called Ellipta. In July 2012, Glaxo and Theravance had announced the submission of regulatory applications for the chronic obstructive pulmonary disease (COPD) indication in both the US and the EU. In the EU, a regulatory application for asthma was also submitted. We note that the regulatory applications for both COPD and asthma in the EU have been validated by the European Medicines Agency (EMA).

Glaxo is also looking to get approval for FF/VI for COPD and asthma patients in Japan, where a Japanese New Drug Application (JNDA) was submitted recently.

Our Take

FF/VI, if approved, will be positioned as a replacement for Advair, one of Glaxo’s highest revenue earners with 2011 sales exceeding £5 billion. We note that Glaxo along with Theravance is also developing other COPD candidates including LAMA/LABA (UMEC/VI) and MABA (GSK961081).

In May 2012, Glaxo had acquired 10,000,000 shares of Theravance for approximately $21.2887 per share. With this transaction, Glaxo increased its holding in Theravance to 26.7% from 18.3%. The increased holding by Glaxo reflects its confidence in the pipeline candidates.

We currently have Neutral recommendations on both Glaxo and Theravance. Both the stocks carry a Zacks #3 Rank (Hold rating) in the short run.