GSK

Business Context and Reporting Period

This Form 6-K filing by GlaxoSmithKline plc (GSK) covers the period ending September 23, 2010. The report details a significant regulatory update regarding the diabetes medication Avandia (rosiglitazone maleate) following reviews by the European Medicines Agency (EMA) and the US Food and Drug Administration (FDA).

Key Financial Metrics

The filing provides specific financial data related to Avandia products but does not report consolidated company-wide revenue, profit, cash flow, or debt metrics.

• Avandia Sales (H1 2010): Total sales were £321 million, representing an 18% decline at constant exchange rates.
• Regional Breakdown (H1 2010): US sales were £164 million (-23%); Europe was £72 million (-17%); Emerging Markets were £37 million (-5%); Rest of World was £48 million (-6%).
• One-Off Costs: GSK expects approximately £100 million in pre-tax one-off costs for 2010, comprising stock write-offs, asset write-offs, and related expenses.

Material Changes and Regulatory Actions

Material changes stem from divergent regulatory decisions in the EU and US:

• European Union: The EMA suspended the marketing authorization for all rosiglitazone-containing medicines (Avandia, Avandamet, Avaglim). Physicians are advised to transition patients to alternative treatments. The suspension remains unless data proves benefits outweigh risks for specific patient groups.
• United States: Rosiglitazone-containing medicines (Avandia, Avandamet, Avandaryl) remain available but with additional safety labeling, use restrictions, and a mandatory Risk Evaluation and Mitigation Strategy (REMS).
• Clinical Trials: The FDA placed the TIDE study (the only GSK-sponsored Avandia trial in the US/EU) on full clinical hold. Additionally, the FDA imposed a post-marketing requirement for an independent re-adjudication of the RECORD study endpoints.
• Marketing: GSK will voluntarily cease promotion of Avandia globally.

Guidance, Outlook, and Management Commentary

Management has revised its outlook for Avandia significantly:

• Sales Forecast (H2 2010): Global sales are now expected to range between £100 million and £150 million, net of customer returns.
• Long-term Outlook: GSK anticipates minimal annual sales for Avandia products after 2010.
• Management Stance: Dr. Ellen Strahlman, Chief Medical Officer, emphasized that patient safety remains the primary concern. GSK maintains that Avandia is an important treatment for type 2 diabetes and is cooperating with regulators to implement required actions.

Investor Verification Checklist

• Verify the impact of the £100 million pre-tax one-off charge on full-year 2010 earnings.
• Monitor the progress of the FDA-mandated independent re-adjudication of the RECORD study.
• Track the volume of patient transitions to alternative treatments in the EU following the marketing suspension.
• Assess the effectiveness of the REMS program in the US on future prescription volumes.
• Review the company's pipeline for alternative diabetes treatments to offset the loss of Avandia revenue.