GlaxoSmithKline: Cardio Specialist to Fill Avandia Void

Privately-owned specialty pharma company Reliant Pharmaceuticals holds the US license to Lovaza, a dyslipidemia therapy which is thought to have provided the primary motivation for GlaxoSmithKline’s $1.65 billion takeover offer. The deal will help GSK to recover sales following a loss of revenue from its diabetes drug Avandia, which has been associated with an increased risk of heart attack.

Launched in 2005, Lovaza (formerly known as Omacor) is the first and only omega-3 medication approved for prescription by the FDA with its primary indication as a dietary adjunct in patients with high levels of triglycerides, itself a common cause of coronary artery disease.

In the nine months ending 30 September 2007, Lovaza generated sales of $206 million, equating to an impressive like-for-like increase of 115% on the previous year. Lovaza provided the principal contribution to Reliant’s top-line, which weighed in at $341 million for the nine-month timeframe of 2007.

Reliant’s commercial presence is focused solely on the cardiovascular market, offering two drugs for hypertension (InnoPran XL, a controlled release formulation of propranolol, and DynaCirc CR, a controlled-release formulation of isradipine) and Rythmol SR (propafenone), which is used to treat abnormal heart rhythms. These compounds, although important, will play a back seat to the value provided by Lovaza, which offers GSK a niche opportunity to expand its presence in the lucrative non-statin dyslipidemia segment: a market worth in excess of $2 billion.

Given the strength of its current position, Reliant was looking at an IPO at the time GSK stepped in with the takeover bid. The offer from GSK has therefore proved a timely one in the corporate evolution of the privately-owned player.

Strategically, the acquisition will help GSK plug the gap created by the decline of Avandia (rosiglitazone), its type 2 diabetes therapy which has become the subject of significant safety concerns. A recent FDA review led to the addition of a warning about the potential risk of heart attack to Avandia’s label, with the request that GSK conduct a new long-term study to compare the drug’s cardiovascular risk to other oral type 2 diabetes drugs.

The sharp decline highlighted by GSK’s recent Q3 results, which showed Avandia sales fell 38% to $415 million for the quarter, will continue on the back of this label change. Given this growing problem, GSK has turned its attention to a potentially lucrative piece of M&A.