The Associated Press - Sunday, July 2, 2000
Phil Galewitz, AP Business Writer

After a bright start to 2000, Glaxo now faces problems with several key products. The include safety questions about its highly-touted pill for irritable bowel syndrome, falling sales of its top migraine drug and a disappointing premiere for its new flu medication.

Analysts say Glaxo SmithKline - the name of the merged company after the deal is approved by U.S. and British officials - should be able to overcome the setbacks. But the problems with the three medications highlight the need for even the biggest pharmaceutical firms to constantly pump out new best-selling medicines.

"The merger certainly comes at a fortuitous time for Glaxo," said Bob Kirby, an analyst with Edward Jones.

SmithKline will give Glaxo several top blockbuster drugs, including the depression pill Paxil, the antibiotic Augmentin. It also gets Avandia, a promising new diabetes pill.

Last week, the U.S. Food and Drug Administration reported that 16 women suffered serious intestinal side effects after using Lotronex, Glaxo's new drug for irritable bowel syndrome. Seven users developed serious constipation, six so severe they were hospitalized. Three required surgery, including one woman who had her entire colon removed.

An FDA advisory committee decided not to require Glaxo to add a dire safety warning on the drug's label. But analysts say the safety issues will hurt sales and mean the drug likely won't be the blockbuster with $1 billion or more annual sales that some industry observers had predicted. Even before the FDA review, analysts said sales of Lotronex were running slower than expected.

U.S. doctors have written about 130,000 prescriptions for Lotronex since it was approved in February as the first new drug in years to address the often debilitating bowel disorder.

Instead of changing the label, Glaxo will send letters to doctors warning them to be sure they give the drug only to the right patients.

Lotronex only works on women, who make up about 70 percent of the millions of patients suffering from irritable bowel syndrome. Those with the type of irritable bowel syndrome that causes constipation or a mix of diarrhea and constipation shouldn't take Lotronex. The pill is intended for the one-third of the syndrome's sufferers who predominantly suffer from diarrhea.

David Sachs, fund manager of Sach-Gruntal Medical/Science Fund, said Lotronex will be hurt by the safety concerns. "It certainly shrinks their market potential," he said.

Lotronex also will face new competitors, including the drug Zelmac from Novartis.

Glaxo lost a competition with Roche Pharmaceuticals this year in a battle over new flu drugs- despite Glaxo's heavy marketing blitz that featured "Seinfeld" star Wayne Knight.

U.S. doctors this winter wrote about 728,000 prescriptions for Roche's flu drug Tamiflu compared to 514,000 for Glaxo's Relenza, according to market data firm IMS Health. Tamiflu had about $41 million in sales versus $27 million for Relenza.

Analysts say the results were not surprising because Tamiflu is given as a pill while Relenza is taken with an inhalation device that can seem complicated to use. Glaxo last year spent nearly $20 million on consumer advertising for Relenza, according to Competitive Media Reporting.

Glaxo spokesman Rick Sluder said the company still has high hopes for Relenza. The company wants to show consumers that the inhaled Relenza is actually an advantage because the drug goes directly into the lungs, as opposed to a pill which must first go though the digestive system, Sluder said.

One of Glaxo's top-selling drugs for the past several years has been its migraine pill Imitrex. But while Imitrex still controls about 45 percent of the U.S. migraine market, its sales have been falling as competitors emerged.

Imitrex had about $778 million in U.S. sales in 1999, down from $875 million in 1998, according to IMS Health. The declines seem to have accelerated this year, with sales falling 6 percent in the first quarter over the same period a year ago.

"This is one of our challenges," Sluder said, noting Glaxo has failed to increase the overall market for migraine drugs.

Glaxo has faced hurdles before, perhaps the biggest overcoming the patent expiration in 1997 for its blockbuster ulcer drug Zantac. The company saw about $2 billion in sales virtually disappear from 1996 to 1998.

Noting the company's leading sales of several big asthma and AIDS drugs, Sluder says Glaxo business remains strong.

Glaxo is awaiting U.S. approval for Advair, a new drug that combines the company's two asthma drugs Serevent and Flovent. A new combination HIV drug is also awaiting approval.

Investors seem to be taking a cautious attitude. U.S. shares of Glaxo have risen only about 3 percent this year, while pharmaceutical stocks overall are up about 20 percent.
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