GSK dealt twin blow by brokers

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GlaxoSmithKline, the UK-based drugs group, was dealt a double blow on Tuesday when one broker issued a downgrade on concerns over its new vaccine and another called for an overhaul of its research and development arm.

Investment bank Morgan Stanley switched the company to “underweight”, arguing that Cervarix, its vaccine to prevent cervical cancer already on sale in the EU, was unlikely to be launched in the US until 2014.

The move marks a fresh blow for GSK in its fight for market share with Merck and Sanofi-Aventis, developer of the` rival cervical cancer vaccine Gardasil, already on sale in the European Union and the US.

“We believe the market is inappropriately relaxed following GSK’s guidance over timelines and [European regulatory] approval,” the bank said. It said the vaccine represented a quarter of GSK’s revenue growth over the next four years at a time when it faced a series of patent expiries, and revised its 2010 earnings per share forecast down to 10 per cent below analysts’ consensus.

The research said the US Food and Drug Administration had not approved a new adjuvant – a chemical to enhance vaccine efficacy – since the 1930s, adding there were concerns the vaccine could cause lupus and heart disease in mature patients.

GSK faces competition for Cervarix in Europe and the UK’s advisory panel recently said it was likely to recommend National Health Service reimbursement of Gardasil unless GSK’s price was significantly lower.

GSK said on Tuesday night: “The evidence for the safety profile of Cervarix remains very strong. In a recent analysis involving over 65,000 patients that we have submitted for publication we have seen no significant difference between Cervarix and control groups in the overall incidence of auto-immune disorders.”

In a separate report on Tuesday, ABN Amro, GSK’s joint broker, called for reform of the company’s research and development function.

It questioned whether GSK’s much-vaunted Centres of Excellence in Drug Discovery had explained its stronger pipeline since 2000, arguing that patents for products now in development had been filed before then. It said productivity had declined since 2005 and oncology and cardio vascular and metabolism research had slowed.

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