A new chronic obstructive pulmonary disorder (COPD) drug from GlaxoSmithKline (NYSE:GSK) received a favorable recommendation from a panel that advises the Food and Drug Administration, and the move sparked a rally on GSK stock.
Glaxo shares hit a new 52-week high of $50.34 Wednesday, and in trading in London on Thursday shares advanced more than 4 percent.
The positive panel vote may mean a broad label approval for the drug, which was developed to treat chronic obstructive pulmonary disease, according to Bloomberg Industries analysts. The FDA is expected to decide whether to approve the treatment, which the London-based drugmaker licensed from Theravance Inc., by May 12.
“The benign tone of the FDA briefing documents makes us materially more upbeat over the near-term approval,” Andrew Baum, an analyst at Citigroup, wrote in a note to investors. He recommends buying the shares.
It’s unlikely the FDA will block final approval despite side effects, Tim Anderson, an analyst at Sanford C. Bernstein, wrote in a note. He forecasts that sales of Breo Ellipta will reach 703 million pounds in 2020. Anderson has a “market perform” rating on the shares.
Glaxo is Theravance’s largest shareholder, with 27 percent of the South San Francisco, California-based company’s stock, according to data compiled by Bloomberg.
The lung ailment, often called smoker’s cough, can cause a number of breathing problems, including chronic bronchitis and emphysema.
Breo is a combination of two respiratory drugs that can help open lung air passages and reduce swelling. The drug is designed to be used with the Ellipta inhaler device.
The British drugmaker, which maintains its U.S. headquarters in Research Triangle Park, said in a statement following the meeting that the recommendation is a “crucial first step toward making Breo Ellipta available for appropriate COPD patients across the U.S.”
The drug, which was developed in collaboration with drug partner Theravance, is also under regulatory review in the European Union.
If approved, Breo would compete with similar twice-daily products Advair, a GSK product, and Symbicort, from AstraZeneca Plc. Advair, prescribed for asthma and COPD, is GSK’s best-selling product at more than $4 billion in sales per year. But Advair patents expired last year.
“Looking at the risk/benefit analysis of this, benefit won,” James Tracy, a panel member who is an assistant clinical professor of internal medicine at Creighton University School of Medicine in Omaha, Nebraska, said during the hearing.
The drug may generate $1.3 billion in sales for GSK in 2018, the average of five analysts’ estimates compiled by Bloomberg. South San Francisco, California-based Theravance would receive royalties of 15 percent on the first $3 billion of sales and 5 percent on any sales higher, the company’s chief executive officer, Rick Winningham, said in an interview with Bloomberg News last month.
Breo is a combination of the compound vilanterol and a corticosteroid. Breo and similar combinations carry side effects, including pneumonia and increased risk of fractures, FDA staff said in a report April 15. FDA staff questioned whether the benefit of Breo, which it called evidence of “less than robust” against vilanterol alone to relax the airways, outweighed the side effects.
Panel members said patients with severe cases of chronic obstructive pulmonary disease who would use the drug would benefit despite the risks.
The panel voted 9-4 Breo should be approved to treat airflow obstruction associated with chronic obstructive pulmonary disease and to reduce exacerbations of the disorder. Advisers also voted 10-3 that GSK and Theravance demonstrated the safety of the drug.
(Bloomberg News and The Associated Press contributed to this report)