Broker snap: Glaxo faces generics threat

23rd Feb 2010 11:24

US senators want GlaxoSmithKline to withdraw its antidiabetic Avandia on concerns it may increase the risk of heart attacks, but analysts at SocGen say this is unlikely.Glaxo maintains it shared all relevant information with the US Food & Drug Administration (FDA) and a 2009 study said it was unlikely to lead to any increase in heart attacks.The French bank reckons the remaining US Avandia franchise (£425m in 2009) represents a mere 2% of 2009 group earnings, while generics are expected from 2012.Best-selling asthma drug Advair is also under fire, although SocGen believes the FDA's review of labelling will result in temporary dips in prescriptions at best.It's the "underappreciated" generic risks linked to Advair that really bug the broker though. "While GSK's business is among the most resilient among the EU majors in the absence of premature Advair generics, we see limited upside and believe that more than 20% of near-term earnings may be at risk from Advair generics in the US, where a generic filing may be imminent, and Europe, where patent litigation is underway," it tells clients. "Consequently, we view GSK shares as offering a relatively unattractive risk/reward profile." It has the drug group down as a 'sell' with 999p target price.