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Tickers in this Article: GSK, FOLD, THRX, HGSI
Glaxo Group Limited, an affiliate of GlaxoSmithKline (GSK), and Amicus Therapeutics (FOLD) recently announced the expansion of their existing agreement related to the development and commercialization of migalastat HCl (also known as AT1001) for Fabry disease.

Additionally, Glaxo announced its intention to hike its stake in Amicus to 19.9%. Glaxo will make an investment of $18.6 million and buy 2,949,581 shares of Amicus at $6.30 per share. We note that as of March 31, 2012, Glaxo's holding in Amicus was 14.8%, representing an equity investment of $31 million. We believe that Glaxo's increased holding in Amicus reflects its confidence in Amicus' pipeline.

As per the terms of the expanded deal, Glaxo and Amicus will jointly develop all formulations of migalastat for Fabry disease. Regarding the commercialization of migalastat, Amicus will possess the rights in the US while Glaxo will have the rights to market the drug in the rest of the world.

Migalastat is being developed in three different programs. It is being evaluated as a monotherapy for Fabry disease with data from a phase III study expected in the third quarter of 2012.

The second program is evaluating the use of migalastat plus enzyme replacement therapy (ERT) for Fabry disease. Positive preliminary results from an ongoing phase II study were announced in January 2012.

Migalastat is also being co-formulated with Japan-based JCR Pharmaceuticals Co.'s JR-051, a proprietary recombinant human alpha-Gal A enzyme. The studies are still in pre-clinical stage. The companies expect to initiate clinical studies in 2013.

Our Take

A major part of Glaxo's revenues will be exposed to generic competition as multiple drugs are scheduled to lose exclusivity in the next few years.

We expect the company's top line as well as gross margins to remain under pressure in the coming quarters. In addition to generic competition, the US Health Care Reform and EU pricing pressure will continue to affect sales.

Glaxo is looking towards deals and acquisitions to drive growth. The company is focusing on increasing the rights on its partnered products and promising pipeline candidates, so that it stands to benefit more from their success.

Glaxo's acquisition of Cellzome and increasing investment in Theravance Inc. (THRX) and Amicus indicate its efforts to expand the pipeline. This week, Glaxo also entered into a definitive agreement to acquire Human Genome Sciences (HGSI) for $14.25 per share in cash. With this acquisition, Glaxo will gain full ownership of lupus drug Benlysta along with albiglutide and darapladib.

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