GlaxoSmithKline Share Price Plummets Following FDA Ruling on Asthma Treatment

Strategic Insights -

Investors severely reacted to a recent US Food and Drug Administration (FDA) ruling on how GlaxoSmithKline should label its best-selling asthma drug, Advair. The ruling came on Friday, recommending that Advair, sold as Seretide in Europe, should be re-labelled to indicate it should only be prescribed for patients who have not responded to other medication. As a result, GlaxoSmithKline's shares suffered a 4% decline, closing at £14.39. However, the shares recovered from their low of £14.18 as analysts questioned the extent of the damage caused by the FDA's ruling.

Key Takeaways:

  • GlaxoSmithKline's share price dropped by almost 4% after the FDA's ruling on Advair labelling.
  • The FDA recommended re-labelling Advair to indicate that it should only be prescribed for patients who have not responded to other medication.
  • Advair is GlaxoSmithKline's best-selling drug, with worldwide sales of £3.43bn last year, and is an important driver of revenue growth for the company.
  • City analysts were divided on the impact of the re-labelling on sales, with some downgrading the stock while others expected sales to continue growing.
  • The company's asthma drugs account for about 15% of total sales and are a crucial area for revenue growth in the next few years.
  • Jeremy Batstone, at Charles Stanley, argued that investors had over-reacted to the FDA's announcement but noted that GlaxoSmithKline's share price is vulnerable to any negative news on product performance.

Statistics:

  • GlaxoSmithKline's share price dropped by 58p, closing at £14.39.
  • The shares recovered from their low of £14.18 as analysts questioned the extent of the damage.
  • Worldwide sales of Advair were £3.43bn last year.
  • The company's asthma drugs account for about 15% of total sales.
  • GlaxoSmithKline's market value has increased by 17% this year despite the recent decline in share price.

Sources:

  • "Glaxo's shares plunge 4pc as FDA ruling hits asthma drug sales" by Ian Griffiths, Investors Chronicle (no date mentioned)
  • Press release from GlaxoSmithKline regarding the FDA's proposed labelling changes
  • Quotes from analysts at Credit Suisse First Boston, Dresdner Kleinwort Wasserstein, Morgan Stanley, and Jeremy Batstone, at Charles Stanley
  • Financial data on GlaxoSmithKline's share price and sales from reputable sources.