The UK company's shares fell 16 per cent from 60 pence to just over 52 pence when the news emerged on Friday, but have since rebounded above the 55 pence level. Analysts at Credit Suisse First Boston described the initial share price decline as an overreaction by the market.
SkyePharma licensed the Geomatrix drug delivery technology underlying Paxil CR to GSK. But it has no direct involvement in the drug's manufacturing and, more importantly, the problems do not relate in any way to the technology itself so SkyePharma's other drugs based on Geomatrix will not be affected. The analysts suggest that in the worst case scenario, SkyePharma will lose 11 per cent of its 2005 revenues, and less if GSK can resolve the manufacturing deficiencies promptly.
Sales of Paxil CR reached £396m (€574m) in 2004, climbing 14 per cent despite generic competition resulting from the loss of patent protection on Paxil, GSK's immediate-release formulation of the drug. Also affected by the FDA's action is GSK's combination diabetes treatment Avandamet (rosiglitazone and metformin) which, alongside its parent drug Avandia (rosiglitazone), added more than £1.1bn to GSK's coffers last year.
Analysts have suggested that the manufacturing deficiencies uncovered by the FDA, at plants in the US and Puerto Rico, could lead to suspension of the drugs production until early next year. The FDA and US Marshals seized more than half GSK's inventory of Paxil CR in the Cidra plant in Puerto Rico, as well as more than 300,000 bottles of Paxil CR and 250,000 bottles of Avandamet at the Knoxville facility in the US.
The company recalled about 78,000 bottles of Paxil CR in December, but the FDA felt this did not go far enough and obtained a court injunction to allow it to seize the batches. The manufacturing problems first came to light in 2002, and GSK has been unable to solve the problems to the agency's satisfaction.
Among the violations noted by the FDA was the finding that the Paxil CR tablets could split apart and patients could receive a portion of the tablets that lacks any active ingredient, or alternatively a portion that contains active ingredient and does not have the intended controlled-release effect. Additionally, the FDA found that some Avandamet tablets did not have an accurate dose of rosiglitazone.
The US agency said that the deficiencies did not pose a risk to patients, and stressed that those taking them should continue to do so and talk with their doctors if they have concerns.