Recently, GlaxoSmithKline (GSK) has received a lot of breathing room with respect to its respiratory drug Advair. That’s because a lot of big pharma companies have suffered setbacks in getting out generic versions of the drug. This will allow GlaxoSmithKline some breathing room to build its pipeline. Advair produces a lot of revenue for the company, therefore, having competition out of its space will allow it to sell the drug without any interruption for the time being. That’s why I believe that GlaxoSmithKline is a good buy.
GlaxoSmithKline received a second lifeline after the FDA rejected Mylan (MYL) generic version of Advair for a second time. Mylan had stated that the FDA could not approve the drug. The FDA stated that there were “minor issues” relating to the drug, and therefore it could not approve it. This is not a good situation for Mylan at all, but it is a huge gain for GlaxoSmithKline. In addition, these supposed minor issues are not yet known. That’s because Mylan has not yet received the CRL from the FDA. It is expecting to receive the CRL by June 26. Mylan stated that it has priority designation and that as soon as it responds to the FDA about the minor issues, it could still potentially receive approval within 90 days thereafter. The problem is that many companies have failed to come up with an adequate generic version of Advair. There is no guarantee that the FDA will agree with Mylan’s responses. Considering that the issues raised in the CRL are not yet known, I don’t believe that Mylan is doing itself any favors in giving any guidance as to when and if it can appease the FDA in time. GlaxoSmithKline has been having lots of good luck lately with the FDA shooting down a lot of Advair copycats. Back in February of 2018, the FDA also gave a CRL to Novartis (NVS) for its generic Advair version. Novartis is also in a bind. The FDA cited that more data on the drug would be needed for Novartis to have an adequate enough version of Advair to act as a substitute. The company states that it is not likely that its generic version of Advair would make it to market this year. This is another win for GlaxoSmithKline. Finally, a third competitor Hikma Pharmaceuticals (OTCPK:HKMPF) was in the worst shape of all for its generic Advair delay. The FDA stated that it would need an entirely new study if it wanted to gets its hands on approval for its version. If all goes well for Hikma, it could potentially receive FDA approval for its generic version by 2020. What happened with all these other competitors? I mean, the climate is easy enough to where the current FDA administration wants to get as many drugs approved as possible to bring down high drug prices. That means these generic versions of Advair must not be equivalent enough if the FDA has been shooting them all down for regulatory approval.
The multiple setbacks seen by competitors attempting to receive FDA approval for generic Advair is a huge win for GlaxoSmithKline. That’s because it estimated that if generic versions were approved by mid-2018 it could lose up to half of its U.S. sales for the drug. That would mean sales would sink to 750 million Euros down from $1.6 billion Euros in 2017. The CRL from the FDA to three of its competitors means that it can retain this revenue for the time being. Advair is a huge drug for GlaxoSmithKline. Consider that since its approval by the FDA, it has generated up to $101 billion in sales as of the Fall of 2017. The only other two drugs that have topped such a huge amount of revenue over the years are Pfizer (PFE) with Lipitor and Abbvie (ABBV) with Humira. You can see why Advair is an important part of GlaxoSmithKline’s pipeline. At least for now, it has been able to fend off competitors for the time being. That means it could add 7% to this year’s earnings because of Advair. The only big pharma that will come close to gaining regulatory approval in the U.S. could possibly be Mylan if it can get approval by the end of 2018. If it can’t deliver the proper responses by that time frame, then it is likely that Mylan’s generic version of Advair won’t hit the market until sometime in 2019.
Looking To New Products
It’s inevitable that generic competition for Advair is eventually going to hit the market. The good news for GlaxoSmithKline is that it has other products in its pipeline that could possibly make up for the revenue gap left by falling sales of this drug. For instance, a COPD drug known as Trelegy acts as a closed triple therapy treatment. In other words, a three-in-one inhaler for COPD patients. Prior treatments required patients to hold on to multiple inhalers so they could get each of the three drugs: Vilanterol, umeclidinium, and fluticasone. This new option makes it more convenient for patients to take. Analysts predict that Trelegy Ellipta could reach peaks sales of $1.5 billion. That would be good news for GlaxoSmithKline because it could soften the blow of Advair generics hitting the market sometime next year. Another product known as Shingrix, a vaccine for shingles, is expected to have a good year. In the first quarter of 2018, Shingrix generated $150 million in sales. That may seem like a small number, but that was way above what analysts were expecting. Analysts’ expected that sales of the vaccine would only come in at $55 million. That’s triple the amount of sales that were expected for the first quarter. It is estimated that 2018 sales for Shingrix could reach $600 million this year alone.
With a multitude of Complete Response Letters ((CRLs)) given to big pharma companies, it is likely that GlaxoSmithKline will hang onto its blockbuster status for Advair for the time being. If and when the other three competitors receive regulatory approval for the generic versions of Advair, GlaxoSmithKline won’t have to worry much if at all. That’s because sales for Trelegy Ellipta and Shingrix are likely to pick up more by then. The risk here would be if sales of either Trelegy or Shingrix fall, then in that case GlaxoSmithKline would start to feel some pressure on its end. Still, I think that the company has set itself up in such a way that it would be able to cushion the blow from generic competitors for their versions of Advair. For these reasons, I believe that GlaxoSmithKline is a good buy.
This article is published by Terry Chrisomalis, who runs the Biotech Analysis Central pharmaceutical investment research service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to my Service, I’m currently offering a two-week free trial period for subscribers to take advantage of. My service offers deep dive analysis of many pharmaceutical companies throughout the biotech sector. Come see for yourself if my service is right for you.
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