DSKYF Daiichi Sankyo Co Ltd (PK)

Recently, GlaxoSmithKline (GSK) announced that it has filed marketing applications for two influenza vaccines.

The vaccines, up for approval, include a quadrivalent influenza vaccine for the prevention of influenza caused by types A and B strains in adults and children aged 3 years and above. The company is seeking regulatory approval in both the US and the EU.

We note that just a few days ago, AstraZeneca (AZN) had announced the US approval of FluMist Quadrivalent for the prevention of influenza caused by two type A and two type B strains. FluMist Quadrivalent marks the first approval of a four-strain influenza vaccine by the US Food and Drug Administration (FDA).

Meanwhile, Glaxo has also submitted a Biologics License Application (BLA) to the FDA for the approval of an H5N1 influenza vaccine for use in adults. The vaccine is already approved in Europe under the trade name Pumarix.

Glaxo has a strong vaccine segment which generated sales of £3.5 billion in 2011, approximately 16% of the total product sales of the company. According to Glaxo, its vaccines business is the largest in the world.   

Earlier this month, Glaxo had announced that it has signed an agreement with Daiichi Sankyo (DSKYF) to form a joint venture (JV). The JV will be called Japan Vaccine Co., Ltd. and will focus on the vaccines business in Japan. According to Glaxo and Daiichi, Japan Vaccine Co. will be the largest vaccine company in Japan.

Japan Vaccine Co. will purchase vaccines from both Glaxo and Daiichi at fixed prices (undisclosed). The companies will share the costs and profits from the new venture equally. The initial start-up cost for Japan Vaccine Co. will be 100 million yen.

The main products of Japan Vaccine Co. will include Glaxo’s Cervarix for cervical cancer and Rotarix for rotavirus gastroenteritis.

Glaxo in Neutral Lane

We currently have a Neutral recommendation on Glaxo. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

While several products in the Pharmaceuticals segment are facing generic competition, the Consumer side of the business is performing well and should help drive top-line growth. Moreover, Glaxo’s diversified base and presence in different geographical areas should help support revenue growth.

Meanwhile, Glaxo’s restructuring initiative should help offset the impact of increasing generic competition in the next few years and help increase earnings at a faster pace than revenues. Share buybacks should also drive bottom-line growth.

 
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