Now that the manufacturing problems that GlaxoSmithKline has suffered at its Puerto Rico facility with its antidepressant Paxil CR (paroxetine controlled-release) and its antidiabetic agent Avandamet (rosiglitazone plus metformin) are “effectively behind” the firm [[28/04/05c]], analysts at Merrill Lynch say that “we believe that the market can now refocus its attention on the company’s burgeoning pipeline.”
In particular, the broker has published a report focusing on the firm’s lipoprotein-associated phospholipase A2 inhibitor programme. Lp-PLA2 is a new risk factor for cardiovascular disease, analogous to high blood pressure or high cholesterol levels and GSK is investigating whether inhibiting Lp-PLA2 can reduce the risk of developing CV disease. It currently has three Lp-PLA2 inhibitors in clinical development, with Phase III imaging studies expected to commence by end- 2005, though Merrill Lynch notes that a definitive decision on whether to progress to Phase III now has not yet been made.
Furthermore, analyst Lyndall Derrig says that given its novel mechanism, “we caution that this project has high risk of failure.” The project has yet to deliver proof of concept (ie whether inhibiting Lp-PLA2 reduces atherosclerosis), “however, due to its early stage, we believe that there is little downside risk to the share price from failure,” he adds.
Merrill Lynch notes in the report that 20%-30% of the world’s adult population could have high Lp-PLA2 levels, and could therefore benefit from therapy, so “in a ‘blue-sky’ scenario, this potentially opens up a new addressable market the size of the cholesterol-lowering market,” which is currently estimated to grow to $30 billion by 2010. Nevertheless, the broker has not given any forecast sales figure as yet, given that any launch is unlikely to happen before 2010.
In conclusion, Mr Derrig notes that “this project represents a significant, but high-risk, market opportunity and is a good example of GSK being ahead of its peers in a novel, high-potential disease area.” He maintains his ‘buy’ rating on the stock.
