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Tickers in this Article: THRX, GSK, PFE
GlaxoSmithKline (GSK) and Theravance, Inc. (THRX) recently announced that they have completed the phase III program for their pipeline candidate, LAMA/LABA (UMEC/VI), for chronic obstructive pulmonary disease (COPD). LAMA/LABA is a combination of a long-acting muscarinic antagonist/LAMA (GSK573719 or umeclidinium bromide/UMEC) and a long-acting beta2 agonist/LABA (vilanterol/VI).

The 52-week safety study and two replicate 12-week crossover exercise studies for LAMA/LABA are now complete. Data from these studies will be presented at upcoming scientific meetings. Glaxo remains on track to submit regulatory applications for LAMA/LABA toward the end of 2012.  

Earlier, in July 2012, Glaxo and Theravance had announced data from four pivotal phase III studies of LAMA/LABA. While two studies compared the efficacy and safety of LAMA/LABA with VI, UMEC and placebo, the two other studies compared the efficacy and safety of LAMA/LABA with Pfizer's (PFE) Spiriva. The four studies together enrolled over 4,000 COPD patients.
    
In both the placebo-controlled, 24-week, randomized, double-blind studies, LAMA/LABA showed a statistically significant benefit over VI, UMEC and placebo. In the first head-to-head comparison with Spiriva, LAMA/LABA showed a statistically significant improvement. However, in the second study, LAMA/LABA failed to do so although it demonstrated numerical difference.

Our Take

LAMA/LABA, if approved, will be positioned as a replacement for Advair, one of Glaxo's highest revenue earners with 2011 sales exceeding £5 billion. We note that Glaxo along with Theravance is also developing other COPD candidates including Breo (proposed brand name Relvar in the EU, formerly known as Relovair) and MABA (GSK961081).

Glaxo, in May 2012, had acquired 10,000,000 shares of Theravance for approximately $21.2887 per share. With this transaction, Glaxo increased its holding in Theravance to 26.7% from 18.3%. The increased holding by Glaxo reflects its confidence in the pipeline candidates.

We currently have a Neutral recommendation on Theravance, which carries a Zacks #3 Rank (short-term Hold rating). We, however, have an Underperform recommendation on Glaxo, which carries a Zacks #4 Rank (short-term Sell rating). Glaxo's second quarter results missed expectations. The company is facing headwinds like generic competition and EU pricing pressure.

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