Broker snap: Generic competition fears ease at Glaxo, says Panmure

11th Oct 2013 09:48

GlaxoSmithKline's share price edged higher on Friday morning on hopes that generic versions of its best-selling drug Advair may not come to market until later than expected - something that Panmure Gordon believes is a reason to 'buy' the UK-listed stock.The broker highlighted comments from Teva, the world's largest generic manufacturer, which implied that it did not expect Advair generics until 2018 at the earliest."This, together with news of significant progress in GSK2606414 in Alzheimer's disease, prompts us to reiterate our 'buy' recommendation and point to today's level as good entry level to the stock," said analyst Savvas Neophytou.The stock has fallen sharply over recent months on fears of increased competition arising from generic copies of Advair following the publication of new guidelines from the Food and Drug Administration for the development of generic copies of combination inhaled drugs, including Advair. This drug represents around a quarter of Glaxo's profits at the moment, the broker estimates.Neophytou said: "We note that there are a number of process steps (and a number of years) that need to take place ahead of any possible increased competition; the market has taken a dim view of developments."Nevertheless, he expressed his confidence in the company's respiratory pipeline, which should "provide mitigation" to increased risks to Advair.Neophytou said that the stock's valuation - trading at 13.7 times 2013 earnings and 12.5 times 2014 earnings - is "now undemanding [...] and does not fully capture the value of the pipeline".The target price was left at 1,850p.The stock was up 1.04% at 1,561.5p by mid-morning trade on Friday.BC