Update on Glaxo/Theravance's COPD Drugs - Analyst Blog

Pipeline updates are highly-awaited events in the pharma/biotech sector as they play an important role in deciding whether or not to invest in a particular company. These updates provide information on drugs and sometimes give an insight into its commercial potential.

Earlier this week, GlaxoSmithKline GSK and partner Theravance, Inc. THRX announced the initiation of a phase III study, which will evaluate the use of Relvar Ellipta (fluticasone furoate and vilanterol, FF/VI) in patients suffering from chronic obstructive pulmonary disease (COPD).

The 12-week, multi center, randomized, double-blind, parallel-group phase III study will compare the efficacy and safety of once daily Relvar Ellipta (100/25mcg) with once daily VI (25mcg). Glaxo plans to enroll approximately 1,580 patients including approximately 350 Japanese patients in the study.

We remind investors that last year, Glaxo had withdrawn its marketing application for Relvar Ellipta for the COPD indication in Japan. The marketing application was withdrawn as Glaxo believed that the available data was insufficient to secure approval in the country.

Efficacy data from two six-month studies on Japanese patients were available. However, in these studies, the addition of FF 100mcg to VI 25mcg did not show any statistically significant improvement in lung function.

Thus, it is crucial for Glaxo that Relvar Ellipta shows significant improvement in lung function over VI in at least the Japanese patients in this phase III study for securing approval in Japan.

We note that the Japanese Ministry of Health Labour and Welfare has already approved Relvar Ellipta (100/25 mcg and 200/25 mcg) for the treatment of asthma in Sep 2013. Apart from that, Relvar Ellipta is approved in the EU (for both COPD and asthma) and the U.S. (under the trade name Breo Ellipta for COPD).

Relvar/Breo Ellipta generated revenues of £8 million in the fourth quarter of 2013. Glaxo has a strong portfolio of respiratory products including Anoro Ellipta and Relvar/Breo Ellipta. If successfully commercialized, these drugs will compensate the loss of revenues once Advair – one of Glaxo's highest revenue grossers – goes generic. The product generated sales of $5.3 billion in 2013, accounting for almost 25% of the company's Pharmaceuticals and Vaccines segment revenues.

Glaxo and Theravance both currently hold a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Allergan Inc. AGN and Johnson & Johnson JNJ. Both hold a Zacks Rank #2 (Buy).