Broker snap: Generics threat tightens breathing room at Glaxo, says Jefferies

19th Dec 2013 10:10

Jefferies has maintained its 'hold' rating for GlaxoSmithKline (GSK) after Denmark approved the sale of a generic copy of its top-selling inhaled lung drug, Advair.It was announced on Thursday that Novartis' Sandoz and Vectura have been given the green light by Danish authorities for the V315 AirFluSal inhaler, generally accepted to be a branded generic version of GSK's Advair (otherwise known as Seretide outside the US).Jefferies said that this announcement tightens the breathing room around GSK's product."Sandoz/Vectura's EU branded generic of Advair/Seretide was anticipated, though the timing was uncertain. Confirmation of its approval in Denmark underpins our expectation that an increasingly competitive EU respiratory market may see further reference pricing, which could negatively impact Advair, Symbicort [AstraZeneca] and Breo."The broker explained that AirFluSal is not a direct substitute for Advair - representing only an alternative 'value' brand product - and so the discount in price is only modest. Nevertheless, it said that increased competition will "inevitably put downward pressure on price in the European space".Jefferies also said it is possible that consensus forecasts do not yet reflect the "likely" US substitutable generics of Advair from 2017/18.The broker kept its 1,700p target price for the stock.BC