The Day After – GSK not out of the woods

The Day After – GSK not out of the woods

Although the FDA panel did not recommend that Avandia be pulled from the market, Diabetic Investor sees the positive move in GlaxoSmithKline (NYSE:GSK) shares as premature. As we indicated yesterday while the panel failed to reach a consensus on whether the FDA should place a Black Box warning on the drug, this is still the most likely outcome. It should also be noted that final nail in Avandia’s coffin could come when the FDA finally reviews a meta-analysis being done by Takeda for their TZD Actos.

It is this meta-analysis that Dr. Graham used as his basis in calling for Avandia being removed from the market. Evidence appears to be building that Actos does not carry the same heart risk as Avandia. Should the meta-analysis prove this point physicians would have all they need to move their remaining Avandia patients to Actos. The facts are physicians have already stopped prescribing Avandia for newly diagnosed patients and are switching poorly controlled patients who were taking Avandia to alternate medications. The only decision left is what to do with the sub-set of patients who are under control and on Avandia.

While no one likes to make changes when a therapy is working, keeping even a well controlled patient on Avandia carries a high degree of risk for the physician. Besides the risk of being sued should the patient develop any cardiovascular issues, physicians will have additional monitoring responsibilities if they leave the patient on Avandia. This could come in the form of additional tests or office visits which the patient may be reluctant to pay for when there are alternatives available.

The bottom line here is Avandia’s share will continue to fall and it’s only a matter of time before scripts stop coming. Diabetic Investor does see GSK shares recovering over the long term, however we’re not convinced shares have bottomed out even at today’s lower levels. Investors may be wise to wait until the FDA issues their final ruling on the drug before jumping back in.

David Kliff
Diabetic Investor
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