GlaxoSmithKline (GSK) recently announced that it has received US Food and Drug Administration (FDA) approval for its influenza vaccine, Fluarix Quadrivalent for the prevention of influenza caused by types A and B strains in adults and children aged 3 years and above.
Fluarix Quadrivalent helps fight against two strains of influenza A and two strains of influenza B, thus providing it with an edge over the currently available trivalent Fluarix version. Glaxo reported 2011 Fluarix sales of £230 million. We expect the approval of Fluarix Quadrivalent to enable the company to solidify its position in the market once it is made available in 2013-14 flu season.
Although Fluarix Quadrivalent is the first intramuscular quadrivalent vaccine to receive approval, we note that an intranasal influenza vaccine AstraZeneca’s (AZN) FluMist Quadrivalent is already approved (March 2012) in the US.
Our Recommendation
We currently have a Neutral recommendation on Glaxo. Several products in Glaxo’s portfolio including Valtrex, Arixtra, Evoclin, Lamictal, Imitrex, Requip, Combivir and Epivir are facing declining sales due to intense generic competition. We expect the company's top line and gross margins to remain under pressure in the coming quarters. EU pricing pressure will continue to affect sales as well.
Glaxo is aiming to maximize the potential return from its pipeline. The company is looking to drive growth through deals and acquisitions. Further, the company is focusing on increasing the rights on its partnered products and promising pipeline candidates, so that it stands to benefit more from their success.
Glaxo’s acquisition of Cellzome and Human Genome Sciences, increasing investment in Theravance Inc. (THRX) and Amicus Therapeutics (FOLD) and amended agreement between ViiV Healthcare and Shionogi indicate its efforts to expand the pipeline.
Apart from this, Glaxo continues to progress on its cost-cutting initiative, which should help reduce the impact of increasing generic competition over the next few years and boost earnings.
While Glaxo carries a Zacks #3 Rank (Hold) in the short run, pharma companies such as Valeant Pharma (VRX) with a Zacks #1 Rank (Strong Buy) appear to be more attractive.
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