Glaxo Pipeline Dented as Mid-Stage Drugs Dropped

GlaxoSmithKline's claim to have one of the best new drug pipelines in the industry has suffered a setback with the loss of a number of experimental medicines in mid-stage clinical testing.

A comprehensive update of the company's portfolio, published in its annual report late on Friday, showed a total of 11 experimental drugs in Phase II clinical trials dropped from development.

Those losses more than offset the entry of seven new commercially significant compounds into intermediate studies.

Andrew Baum, an industry analyst with Morgan Stanley, said Sunday that the loss of the products -- which were still several years from getting to market -- had eroded potential revenues in 2013 by a net $1.3 billion.

"Our pre-existing concerns over the strength of GSK's much hyped pipeline have grown following publication of the company's revised pipeline chart," he said in a note to clients.

"The net changes to our modelled pipeline estimates are consistent with at least a 2% to 3% downward risk to our current 2013 revenue estimates."

Notable losses among drugs that have been terminated include odiparcil for thrombosis, solabegron for diabetes and four separate cancer compounds.

Overall, Morgan Stanley said the risk-adjusted revenue estimate for the 11 discontinued products was $2.3 billion in 2013. That was offset by the emergence of seven experimental drugs with aggregate sales potential of $975 million in 2013.

New drugs moving into Phase II include treatments for rheumatoid arthritis, lung disease, diabetes, insomnia and HIV/AIDS.

Glaxo Chief Executive Jean-Pierre Garnier, who is due to retire in May 2008, has often boasted that the British-based company has the best pipeline in the pharmaceuticals industry.

But while investors agree that the line-up of new drug candidates is very large, there has been disappointment in the past six months that Glaxo has not made faster progress in launching products or getting drugs through advanced clinical trials.

Glaxo will face a key test of its new drug capability next week, when the U.S. Food and Drug Administration is due to deliver its verdict on the company's breast cancer pill Tykerb by March 13.

Tykerb, a rival to Roche Holding's and Genentech's Herceptin, is one of five new products that Glaxo hopes to launch in 2007.

The big question for investors is how long it will take for the new medicines to generate sales that can move the dial at Glaxo, which had annual revenues last year of 23.2 billion pounds.


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