Lamictal, an anti-epilepsy drug launched in Ireland in 1990, has been implicated in recent tests as the cause of a possibly fatal skin condition in children.
Following talks with the Food and Drug Agency in the US, Glaxo revealed yesterday that it had last week issued warnings to doctors of the increased risks and is sending out letters in the UK and the rest of the world where the product is licensed.
Glaxo's shares fell 20.5p at one stage yesterday, but later recovered to end just 6p lower at 1,087p. Analysts were relatively sanguine about the impact of the news on the group, despite the fact that Lamictal is one of the new products identified last month by Glaxo Wellcome chief executive Sir Richard Sykes to take up the running from the best-selling Zantac anti-ulcer drug after key patents expire this year.
One follower said: "This will not have a big effect on earnings or the valuation of the company, but it will have an impact on drug sales."
Sales of Lamictal, market leader in the UK, jumped 64 per cent to pounds 105m last year. Analysts were expecting that figure to grow to around pounds 150m in 1997, rising to a peak of pounds 350m by 2000. The figures compare with pounds 8.34bn for the whole group last year, including pounds 1.93bn for Zantac.
Although Lamictal is not yet registered for paediatric use in the US, the world's biggest drugs market, analysts said the under-16 year old age group was a reasonably significant proportion of the market for the product. It has been licensed for use by children in 25 countries, including the UK from 1994. City projections of sales for the drug are therefore likely to be reined back.
The worries over Lamictal emerged after tests on the use of the drug in children suffering from Lennox-Gastaut syndrome, an acute form of epilepsy which particularly affects children. That showed two out of the 79 children involved developed a serious skin reaction, which led the FDA to suggest the drug results in side-effects for between one in 50 and one in 100 users.
A Glaxo Wellcome spokesman said its own case studies using a wider range of data from around the world showed the incidence to be more like between one in 100 up to one in 300 who developed a reaction.
She admitted, however, that the problem appeared to be worse than in tests conducted before the product was originally licensed, when the incidence was similar to that in adults at one in 1,000 users. Problems can range from a mild skin rash to so-called toxic epidermal necrolysis, a serious skin condition akin to third degree burns. Glaxo said there had been "a handful" of deaths among more than 800,000 people who have used Lamictal since its introduction.