Hay fever ruling puts $900m of GSK revenues at risk

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GlaxoSmithKline will see its Flonase hay fever drug's $900m (£500m) annual sales erode quickly after losing its final legal challenge to cheaper copycat versions in the United States.

Roxane Laboratories, a subsidiary of the German firm Boehringer Ingelheim, began shipping its generic version of the drug in the US yesterday. Par Pharmaceutical Cos, which had been authorised by GSK to launch a copycat version in the US once Roxane's spray reached the market, also resumed shipment of the drug yesterday. Both had to halt sales on 23 February when GSK lodged an appeal against the US Food and Drug Administration's decision to approve Roxane's spray. The British drug maker argued the FDA had not issued proper guidelines for generic nasal sprays.

Flonase had sales of £506m in the US last year, accounting for 2.3 per cent of GSK's total revenues. The group said yesterday it would not appeal again.

The company had signalled for some time that Flonase and two of other drugs could soon face competition from cheaper copycat drugs. That prompted Jean-Pierre Garnier, the chief executive, to issue a cautious earnings forecast for this year. A month ago, he predicted earnings-per-share growth of only 10 per cent, nearly half that of last year. GSK reiterated this forecast yesterday. City analysts were not overly concerned. One said: "Maybe Flonase went a quarter earlier than they had hoped, but it wasn't far from their central planning." Mr Garnier said last month that Wellbutrin, an antidepressant, and Zofran, a treatment to prevent nausea caused by chemotherapy and surgery, could also fall prey to generic rivals. He also cast doubt on the future of the Cox-2 painkiller.

The company's shares received a fillip yesterday after analysts at Morgan Stanley issued a note which included GSK and its British rival AstraZeneca in its top stock picks among pharmaceutical companies. GSK shares rose 16p, or 1 per cent, to 1,507p.