Breakthrough for GSK's Avandia

Annual sales of GlaxoSmithKline's Avandia could rise by a half, analysts said yesterday after news that the blockbuster diabetes drug could also be used to prevent Type II diabetes developing.

In the largest diabetes-prevention trial ever conducted, Avandia was found to cut the risk of developing diabetes by 62 per cent. The results of the landmark study were reported yesterday in The Lancet and at the annual meeting of the European Association for the Study of Diabetes.

Analysts at Merrill Lynch said in a research note that the data could act as an important catalyst for GSK shares, which have become oversold lately, as it could open up a significant new market opportunity for Avandia. It is already the drug maker's second-biggest franchise with £3bn annual sales, and analysts reckon the inclusion of the prevention data on the Avandia label could add $1.4bn of sales. The pre-diabetes market is estimated to be worth $15bn.

However, The Lancet article also argued that different lifestyle - a better diet and more exercise - was equally effective in cutting the risk of developing diabetes.

GSK also faces competition from Novartis: a separate study showed a new diabetes drug developed by the Swiss rival called Galvus cuts blood sugar levels as much as Avandia and without the side effects.

GSK has also struck a deal to supply cut-price HIV/Aids drugs to Russia, slashing the total cost by 70 per cent to $5.6m. The group already supplies Aids drugs at not-for-profit prices (64c a day) to sub-Saharan Africa.

Shares in the drug maker closed up 3p at 1,467p.