Avandia leads SmithKline to growth

SMITHKLINE BEECHAM, the pharmaceutical giant, is heading into a "phenomenal" growth cycle similar to that before the 1994 demise of its blockbuster ulcer drug Tagamet, its chief executive said yesterday.

In an interview to mark the 10th anniversary of the group's formation later this month, Jan Leschly said investors would see the first fruits of the group's early move into genomics going into human trials later this year and next.

But Mr Leschly said the roll out of its diabetes treatment Avandia, new indications for its anti-depressant Paxil/Seroxat and a potential doubling of vaccine sales over the next four to five years were already putting the group on a new plane.

"The perception of SKB has changed - we have known for a while we were going to move into a different phase," Mr Leschly said. "Over the past 10 years we really went through three cycles - the first cycle was between the merger and 1994 when Tagamet went off patent - that cycle was phenomenal."

The company is emerging from a period when it battled to offset Tagamet's loss with new drugs like Hycamtin for cancer and anti-viral Famvir - solid products but not blockbusters.

"We are entering a new cycle which I think is going to be similar to the cycle we had in the early 1990's," he added.

SKB, which announces second-quarter earnings today, is rated around 36-times forecast 1999 earnings, beaten only by Sanofi-Synthelabo in Europe and Pfizer and Warner-Lambert in the US.

Just a year ago Mr Leschly appeared to be on the ropes after merger talks with American Home Products and Glaxo Wellcome failed, sparking talk Glaxo was circling for a hostile bid. Today it is predicting earnings per share growth of 13 per cent for 1999, rising to mid-to-high teens in 2000 and 2001, leaving Glaxo fighting to catch up.

The biggest factor behind the change in fortunes is Avandia, a new type of therapy which improves diabetics' sensitivity to insulin and allows greater control of blood sugar levels.

Analysts predict sales between $1bn and $1.5bn a year after US regulators indicated Avandia and a similar product from Eli Lilly were safer than Warner-Lambert's blockbuster Rezulin. SKB said on Friday US prescriptions were 64 per cent above Rezulin at the same stage.

Among advanced projects, Mr Leschly highlighted Bexaar for non-Hodgkins lymphoma, filed in the US in June, and potent quinolone antibiotic Factive, expected to be filed late this year or early 2000. Lotrafiban and Tranilast will boost the unexciting cardiovascular franchise, supplementing cholesterol- lowering agent Baycol and Kredex/Coreg for congestive heart failure. Ariflo, targeted at COPD (smokers' lungs), should be filed in the middle of next year. "Ariflo is ... another blockbuster potential, which is what it is all about in our business."

Mr Leschly is due to retire in 18 months - though this could change. He is already planning a career in Internet healthcare after he steps down. "When I retire one day I feel I will leave behind a phenomenal company.... And the bottom line is I'm going to keep my stock," he said.