Avandaryl Approval On Track Despite Consent Decree, GSK Says

GlaxoSmithKline is confident FDA will approve its diabetes line extension agent Avandaryl on schedule despite the fact that the manufacturing facility for the product is operating under a GMP consent decree.

"We're still hopeful...for year-end approval of Avandaryl. We're not 100% certain of this, but there's a good chance that this will happen," CEO J.P. Garnier said during an April 28 first quarter earnings call.

The earnings call was held the same day the company announced the good manufacturing practices consent agreement with FDA, and served as the first opportunity for GSK to publicly discuss with investors the financial impact of the company's recent GMP problems.

GSK will not have to pay profit disgorgement as part of the consent decree (see ¹ (Also see "GSK Signs GMP Consent Decree For Cidra Plant But Avoids Disgorgement Fee" - Pink Sheet, 2 May, 2005.) ).

The consent agreement follows FDA's March 4 seizure of all doses and lots of Paxil CR and Avandamet due to good manufacturing practices violations (² (Also see "Paxil CR, Avandamet Seizure Threatens $1 Bil. In Annual Revenue For GSK" - Pink Sheet, 14 Mar, 2005.), p. 9).

The seizures occurred after violations at Cidra were cited by the agency. FDA had issued "Form 483" manufacturing reports in November 2003 and December 2004 following inspections at the facility (³ (Also see "Paxil CR, Avandamet Seizure Threatens $1 Bil. In Annual Revenue For GSK" - Pink Sheet, 14 Mar, 2005.), p. 9).

Among the products listed in the 483s were GSK's pipeline projects Ariflo (cilomilast) and Avandaryl (rosiglitazone/sulphonylurea); GSK has manufactured lots for clinical trials for the two drugs out of Cidra (⁴ (Also see "GSK Cidra Manufacturing FDA-483 Reports Cite Ariflo, 12 Other Products" - Pink Sheet, 21 Mar, 2005.), p. 17).

Ariflo has been long delayed due to efficacy concerns; the consent decree may add another wrinkle to the approval process.

GSK said it will need to work through the GMP issues as quickly as possible in order to launch Avandaryl - which the company predicts "will be as big as Avandamet" - on time.

"As far as Avandaryl, that one is linked to Cidra, so we need to improve all aspects that are in the consent decree," CEO J.P. Garnier said. "It's basically a 'get better' plan in terms at GMPs at Cidra. We expect to be able to do that fairly rapidly."

FDA said the consent decree does not call for the agency to perform lot-by-lot inspections of product coming out of Cidra, but the agency expects to conduct at least annual inspections of the facility. GSK said new product quality would be validated by a third party.

A third party will also validate the seized lots of Paxil CR and Avandamet, and FDA will have to approve the validation plan and sale of the product before it can be shipped.

Based on the terms of the consent decree, GSK can continue to manufacture products at the Cidra facility. The company expects to begin re-supplying U.S. and other markets with both Paxil CR and Avandamet by mid-year.

"I don't think there's a question about reshipment of Paxil and Avandamet. That's a problem that we have mastered and demonstrated to the FDA to their satisfaction," Garnier told investors.

The company believes it may be possible to ship a large portion of the seized product.

"Most of it is actually okay, even though it was seized," Garnier said. "Once we do the [quality assurance] test, we might very well be able to release it and sell it at the right time. I wouldn't assume that most of what has been seized is lost and totally destroyed. That is not the case."

However, "what the FDA doesn't want to see happen is that we take those boxes and start selling...because the product has been deemed potentially tainted and not appropriate for sale," Garnier said.

During the call, GSK was asked whether it was underestimating the impact of the consent decree in light of the effect that GMP problems have had on other large pharmaceutical companies.

Lilly, for example, has faced multiple product approval delays in recent years stemming from GMP issues at the company's Indianapolis facility. While Lilly avoided a consent degree in its most recent run-in with FDA, approvals of Zyprexa IM , Forteo and Cymbalta were delayed.

Lilly also moved fill-finish manufacturing of a fourth product, the erectile dysfunction disorder drug Cialis , from Indianapolis to a facility in Carolina, Puerto Rico to help accelerate its time to approval (⁵ (Also see "Lilly GMP Strategy: Avoid Consent Degree With Open Communication At FDA" - Pink Sheet, 30 Sep, 2002.), p. 31).

GSK said the Cidra GMP violations are more contained than those at Lilly's facilities. Lilly signed consent decrees with FDA in 1989 and 1995.

"The problem we are facing is very different from Lilly," Garnier maintained. "Lilly had a multiple-site problem. They had a system problem. They had things...which were much wider and much deeper than what we have."

"This is not a similar situation facing GlaxoSmithKline," the exec declared. "We did have a problem at Cidra, we still do, we have to fix it. In a way, this is not a whole manufacturing system of 75 plants that is in question."

"That is why the FDA did not block our new product approvals," Garnier said. "For instance, they approved Boniva , they also approved the expansion on Zofran . There's no question that our new product approvals are going as scheduled."

GSK said Cidra deficiencies resulted from the "stress" of manufacturing three widely-used products: Avandia, Avandamet and Paxil CR.

"All those products went from zero to billions very quickly. That didn't help because it put some pressure on three shifts, you have less time to stop and check everything as we should, so GMPs were not of the highest standards at Cidra mostly because of that," Garnier said.

In parallel with the consent agreement, GSK said it was working to reduce the complexity of the manufacturing facility. For example, GSK will reduce the number of products manufactured at Cidra and the number of countries to which the plant's products are shipped.

"As you increase the complexity, GMP principles get more difficult. It's just business as usual, just the plant was a bit overstressed," Garnier maintained. "I wouldn't call it a sloppy operation."

As one example of a product taken out of Cidra, GSK said the European supply of Avandamet will eventually be shifted to the company's Aranda, Spain facility. GSK noted, however, that human resource constraints and the regulatory approval process will likely mean that it will be a gradual process.