Glaxo Drug Slump Dousing Flamel

The launch of the new heart drug Coreg CR was expected to sizzle. Instead, it's been a lot of fizzle, which goes a long way toward explaining the sharp drop in shares of French drug firm Flamel(FLML Quote) this year.

Coreg CR is a second-generation drug for treating congestive heart failure. It uses Flamel's Micropump drug-delivery technology that allows a more convenient once-daily dosing schedule. Flamel receives a royalty of about 5% to 6% on Coreg CR sales.

Last week, GlaxoSmithKline(GSK Quote) announced second-quarter Coreg CR sales of $20 million -- not only well below expectations, but lower than first-quarter sales of $27 million.

Coreg CR was supposed to be a priority for Glaxo because it was developed to replace Coreg IR, a twice-daily beta blocker with sales of $1.4 billion in 2006. Coreg IR hits generic status in September, so Glaxo is trying to convince doctors and patients to switch to Coreg CR before then.

But the switch has gone poorly for Glaxo, in part because the European drug giant has been preoccupied with saving its diabetes drug Avandia. Glaxo employs the same sales force to sell both drugs, so Coreg CR has taken a back seat to Avandia.

Flamel shares, trading recently at $17.99, are down 50% from their 52-week high in February. The stock has declined steadily since the launch of Coreg CR in late March as prescription-tracking data show the drug isn't catching on with doctors.