Glaxo to Hike Stake in Theravance - Analyst Blog

By Zacks Equity Research,

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British pharma giant GlaxoSmithKline ( GSK ) announced that it will increase its holding in biopharmaceutical company Theravance Inc. ( THRX ) to 26.8% from 18.3%. The two companies inked a deal, which will allow Glaxo to acquire 10,000,000 shares of Theravance for approximately $21.3 per share. The deal is worth approximately $212.88 million.

We note that the offer price per share for the transaction reflected a 7.5% premium over Theravance's volume-weighted average price of $19.8 per share over the five-day period ending March 30, 2012. The closure of the transaction is dependent on the approval of Theravance's shareholders (expected at its annual general meeting on May 15, 2012) in addition to other closing conditions.

The increased holding by the pharma major reflects its confidence in the Relovair program, under which the companies are looking to replace one of Glaxo's best selling drugs Advair by evaluating treatment options for asthma and chronic obstructive pulmonary disease (COPD).

We remind investors that in November 2002, Theravance entered into a collaboration agreement with GlaxoSmithKline. Under the deal, the companies are looking to develop and commercialize a once-daily long-acting-beta 2 agonist (LABA) candidate both as a single agent and also as a combination therapy for the treatment of asthma and/or a long-acting muscarinic antagonist (LAMA) for COPD. These programs are collectively known as the Relovair program (phase III completed).

Glaxo intends to seek approval of Relovair in the US and Europe in mid-2012 for the COPD indication. The pharma giant intends to seek European approval of the drug for treating asthma patients in mid-2012. Regarding the US approval of Relovair for  theasthma  indication, Glaxo is in discussions with the FDA. Furthermore, the LAMA/LABA program is undergoing phase III development for treating COPD patients.

Our Recommendation

Currently, we are Neutral on both Glaxo and Theravance. Our long-term stance is in line with the Zacks #3 Rank (short-term Hold rating) carried by both the companies.

GLAXOSMITHKLINE ( GSK ): Free Stock Analysis Report
THERAVANCE INC ( THRX ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: GSK , THRX

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