The type-2 diabetes drug Avandia has been banned in Europe and the UAE. In the United States, stronger restrictions on the drug use have been put in place. Doctors must sign a waiver that they have exhausted all other diabetes remedy options before prescribing Avandia.
The European Medicines Agency’s decision to suspend the drug came after ongoing criticism of the pill in the past few years.
Avandia, the former best selling diabetes pill, has been under heavy scrutiny since 2007 when it was linked to increasing the risk of heart attacks and strokes. The pill, which is produced by British drug maker GlaxoKlineSmith Ltd, will become unavailable throughout Europe in the coming months.
In 2006, Avandia was the best selling diabetes pill in the world. Sales in 2009 still reached $1.2 billion, however lawsuits and settlements piled up. Glaxo paid out over $460 million in settlements during the month of July and further lawsuits are expected in the coming months. The company will really feel the hit financially in 2011 which is expected to be a slow growth year.
In September analysts at both Panmure Gordon and Jeffries and Co. dropped their estimates rating from “Buy” to “Hold”. Jeffries analyst Jeff Holford indicated that Glaxo’s high operating profit margin which is estimated around 80% could mean that the impact would be greater in the earnings numbers than the sales figures. As a result, Jeffries dropped their 2011 EPS 4% for the company.
Shares are down 2.6% for Glaxo since Thursday.