Theravance Inc. surged the most in a year after a staff report by U.S. regulators showed the once- daily lung disease treatment the company is developing with GlaxoSmithKline Plc may be able to win approval.

Theravance rose 19 percent to $28.36 at 4 p.m. New York time for its biggest gain since April 2012. The medication called Breo is meant to treat chronic obstructive pulmonary disease, an umbrella term for emphysema and chronic bronchitis.

Breo would compete with similar twice-daily products Advair, from Glaxo, and Symbicort, from AstraZeneca Plc. Breo may be linked to side effects, including pneumonia, that outweigh any added benefit from the combination of vilanterol with a corticosteroid in a dry powder inhaler, U.S. Food and Drug Administration staff said today. The safety issue was anticipated, analysts from UBS AG and Citigroup Inc. said in notes.


“Overall, the documents seem broadly supportive and propose questions in keeping with our expectation on efficacy and safety,” Andrew Whitney, an analyst with UBS, wrote.

Advisers to the FDA will weigh whether to recommend Breo at a meeting on April 17. The lung disorder, the third-leading cause of death in the U.S., is often caused by cigarette smoking.

Breo would be the first drug to market produced by a Glaxo and Theravance partnership formed more than 10 years ago, said Rick Winningham, chief executive officer of South San Francisco, California-based Theravance. The FDA is expected to decide whether to approve the product by May 12.

A once-daily formulation has better compliance than drugs that must be used more often, Winningham said.

The drug may generate $1.3 billion in sales for London- based Glaxo in 2018, according to the average of five analysts’ estimates compiled by Bloomberg. Theravance will receive royalties of 15 percent on the first $3 billion of sales and 5 percent on any sales higher, Winningham said.

The evidence to support the benefit of the combination over vilanterol alone to relax the airways “are less robust,” FDA staff said. The combination performed better reducing exacerbations of the disease.

Side effects seen with the drug were typical adverse events seen with other combination products. In addition to pneumonia, FDA staff listed fractures as a potential risk for patients who took Breo in clinical trials.

Glaxo is the top holder in Theravance, owning 27 percent of the potential takeover target’s shares.

Glaxo should complete this year a study on Breo’s use in asthma that may enable the companies to file an application for review with the FDA for that indication, Winningham said. The companies also are working on another treatment for chronic obstructive pulmonary disease. The once-daily medicine, Anoro, combines vilanterol with another ingredient to improve lung function.

The FDA is expected to decide whether to approve Anoro in December. The drug would compete with Pfizer Inc.’s and Boehringer Ingelheim’s Spiriva.

Theravance generated $136 million in revenue last year while sales are projected to almost triple to $372 million in 2016, according to the average of six analysts’ estimates.