(GSK) GlaxoSmithKline Earns Positive Opinion From Te European Medicines Agency

January 25th, 2010

Last week, GlaxoSmithKline (GSK) and Denmark-based Genmab received good news with the European Medicines Agency’s (EMEA) Committee for Medicinal Products for Human Use (CHMP) issuing a positive opinion for Arzerra (ofatumumab), a monoclonal antibody. GlaxoSmithKline is seeking approval for the use of Arzerra to treat patients with chronic lymphocytic leukemia (CLL), a cancer of the blood and bone marrow.

The CHMP has recommended Arzerra’s conditional marketing authorization in the EU for those cancer patients who are not responding to the current available treatment options using fludarabine and alemtuzumab. A drug is granted conditional approval to meet an unmet medical demand. An approval of this kind is renewed annually as the drug requires further study to ensure its effectiveness.

Earlier, in October 2009, Arzerra received accelerated approval from the US Food and Drug Administration (FDA) following which Genmab became eligible to receive a milestone payment of DKK 116 million (approximately $23 million) from GlaxoSmithKline. In a pivotal study, it was observed that 42% of patients with CLL who did not respond to fludarabine and alemtuzumab responded to treatment with Arzerra. These patients had a median duration of response of 6.5 months.

While we are pleased with the positive opinion of Arzerra, we remain concerned about GlaxoSmithKline’s vaccine business. With several countries planning to cut back on their swine flu vaccine orders, we believe that revenues from the sale of swine flu vaccines will lag expectations. In fact, the company has recently amended its agreement with the German government under which it will deliver only 70% of the original order. We believe that additional order cutbacks are likely. We have an Underperform rating on the stock.

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