GlaxoSmithKline (GSK) recently entered an agreement with Nabi Biopharmaceuticals (NABI) to bring a new pipeline candidate into its vaccine portfolio. Glaxo will buy Nabi’s PentaStaph vaccine, which is being developed to fight hospital-acquired staph infection.

Staph infections are caused by a drug-resistant strain of bacteria often found in hospitals. PentaStaph is being tested against three different strains of staph and two other antigens.

The deal is valued at $46 million, of which $20 million will be paid immediately. The remaining $26 million will be paid after achievement of four key milestones. The deal is scheduled to close by year-end and Nabi expects to achieve the four milestone payments within 18 months.

GlaxoSmithKline has a strong presence in the vaccine market. The company’s acquisition of ID Biomedical in 2005 helped Glaxo position itself as a major global force in both the injectable and nasally administered flu shot market. The company has several important vaccines in its portfolio including Relenza, Synflorix, and Rotarix.

Going forward, a major contributor to revenue could be Cervarix, a vaccine for HPV (human papillomavirus) which was approved in the E.U. in September 2007 and is currently under regulatory review in the U.S. Cervarix is approved in about 67 countries and has been submitted for approval in many more.

The product is approved for women between the ages of 10 to 45. This is a significant advantage over Merck’s (MRK) Gardasil which is currently approved for ages 11 to 26 (Merck filed for FDA approval in December 2007 to expand the age range through age 45, and recently got a second Complete Response Letter).

Although Merck beat Glaxo to the market, we expect Cervarix to have peak sales in the area of £2 billion. Glaxo has presented very encouraging data against genotypes that account for 70% of cervical cancer cases and management believes that Cervarix may offer protection against several other genotypes. That could increase this figure to 80% of cervical cancer cases. Approval could come later this year.

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Read the full analyst report on “NABI”
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