Merck, Lilly could benefit from Avandia flap

NEW YORK (CNNMoney.com -- The recently published study results that link GlaxoSmithKline's blockbuster diabetes drug Avandia to heart attacks could shift market share to rivals Merck, Lilly and Amylin, despite questions surrounding the data, analysts say.

"It's the second biggest drug for Glaxo, so it's going to a problem for them," said Les Funtleyder, analyst for Miller Tabak, noting that it could take a bite out of Glaxo earnings. "When you take the company's second-biggest drug and put it under pressure, whether regulatory or competitive, I expect there's going to downward revisions."

Avandia, a pill that controls blood-sugar levels in diabetics, totaled more than $3 billion in 2006 sales, making it Glaxo's (up $0.83 to $54.01, Charts) No. 2 behind the Seretide/Advair asthma franchise. But Glaxo could see some of these sales carry over to Januvia from Merck (Charts, Fortune 500), as well as Actos from Eli Lilly & Co. (Charts, Fortune 500) and Takeda Pharmaceuticals, and Byetta from Lilly and Amylin (Charts), according to analysts Funtleyder of Miller Tabak and Peter Cartwright of Evolution Securities.

Funtleyder said he would be revising his $1.8 billion peak sales forecast for Januvia, based on the assumption that it would garner additional revenue from Avandia.

The news has already caused trouble for Glaxo's stock price, which plunged 8 percent on Monday after The New England Journal of Medicine, one of the most respected medical publications in the country, published an analysis of 42 studies of Avandia. The stock gained back 2 percent in Tuesday trading.

The article, authored by Dr. Steve Nissen, chief cardiologist for the Cleveland Clinic, showed a 43 percent increase in heart attack risk for Avandia patients, as well as a 64 percent increase in heart attack death.

The Food and Drug Administration, the agency that approved the drug for the U.S. market in 1999, issued a safety warning about Avandia on Monday and acknowledged there is a "potentially significant" increase in risk of heart attacks and deaths.

But Glaxo did not take its drug off the market, unlike Merck, which withdrew its arthritis painkiller Vioxx in 2004 after a study linked the drug to increased risk of heart attacks and strokes.

The FDA said individual patients should consult their doctors for advice, while the agency plans to hold a panel meeting for further guidance. Rep. Henry Waxman, D-Calif., announced a hearing June 6 on the FDA's role in evaluating the drug's safety.

"When that (FDA) meeting takes place, it's likely that all the diabetes drugs will be on the table," said Cartwright of Evolution Securities, who owns shares of Glaxo stock. "It will be more of a balanced panel, while the NEJM [article] was written by just one individual."

Nissen's results were based on a "meta-analysis" of 42 prior studies involving nearly 28,000 patients. Glaxo said the study is not as accurate as other types of studies, such as the clinical trials that are used to determine efficacy and safety before a drug is approved by the FDA.

"The statistical analysis on which the [FDA] Committee bases its concern is, by the author's [Nissen] own admission, limited, while the editorial accompanying the paper states, 'the possibility that the findings were due to chance cannot be excluded,'" said Glaxo, in a press release. The company also denied accusations that it had deliberately concealed information about the drug's health risks.

Dr. Nissen, who has also voiced safety concerns about Vioxx and is one of the most closely watched professionals in the U.S. medical community, was not immediately available for comment.

Merck was hit with similar accusations over Vioxx, and the company is currently facing about 27,000 lawsuits from former patients and their families who blame the drug for fatal and non-fatal heart attacks.

But Cartwright said Avandia should not be compared to Vioxx because the basis for the percentage risk is just a small number of patients. Out of 28,000 patients in the meta-analysis, 86 suffered heart attacks on Avandia compared to 72 without, with 39 deaths among Avandia patients compared to 22 without.

"If a doctor came up to me and said, 'I'm going to change your treatment based on a meta-analysis study,' I wouldn't be very happy about it," said Cartwright. "In meta-analysis, you're taking old studies or varying demographics and duration and just pooling the data and seeing what comes out of it."

Chris Schott, analyst for Bank of America, referred to Nissen's article as a "questionable analysis," especially in regard to the small number of heart attacks and deaths, but he said the damage to Avandia sales could be significant nonetheless.

"While we can highlight many weaknesses in the scientific analysis, we believe negative publicity associated with the article and its accompanying editorial will place significant commercial pressure on the franchise," wrote Schott in his report. "History would suggest a relatively rapid shift in market share is a possibility when safety concerns emerge on a marketed drug."

Funtleyder and Schott do not own Glaxo shares, though Cartwright does. Miller Tabak does not conduct business with companies mentioned here, though Evolution might make a market in Glaxo.