Drug label change wipes £4bn off Glaxo value

OVER £4 billion was wiped off the value of GlaxoSmithKline (GSK) yesterday after authorities proposed changes to the way its best-selling asthma drug is labelled in the United States.

Glaxo shares slumped 5% after the US Food and Drug Administration (FDA) recommended Advair should only be used by patients who have not responded to other medication. The drugs giant said it disagreed with the FDA, which claimed both Advair and Glaxo’s Serevent treatment may make asthma more severe and should not be used as first treatments.

Advair is Glaxo’s biggest-selling drug, accounting for around a tenth of sales.

Glaxo said it believed labels already gave sufficient safety information to guide doctors about their appropriate use. It said: “GSK has confidence in the proven safety profile of Advair and Serevent when these products are used appropriately and in line with national treatment guidelines.”

Yesterday was the first time investors were able to react to the FDA proposals, which were announced after the close of trading last Friday.

Glaxo recently said Advair sales rose 20% to £737 million in the third quarter of its financial year, contributing to total sales of £5.47 billion. Serevent accounts for far less of the business.

Morten Herholdt, analyst at Barclays stockbrokers, said: “The clinical data leading to this decision was already known and in the drug’s prescription information, but is nevertheless negative as the new guidelines could impact sales.”

Stockbroker Seymour Pierce said: “In our view, the FDA will come under pressure from clinicians who will want to continue prescribing Advair, and such product loyalty will ultimately render the proposed label changes as irrelevant.”

Glaxo said it would work with the FDA to address the “differences of opinion” over labelling of the treatments. Shares were 73p lower at 1424p yesterday.