Avandia Can Stay

As expected after reviewing the hundreds of pages of FDA briefing documents, an advisory panel voted to recommend that GlaxoSmithKline's (NYSE: GSK  ) lead diabetes compound, Avandia, stay on the market in the United States.

The FDA advisory panel was convened yesterday to discuss the potential for Avandia to increase the rate of certain types of cardiovascular adverse events in diabetics taking the drug and what to do about it. Despite the overwhelming negative media attention detailing the risks of the drug, the advisory panel voted 22 to 1 to recommend keeping the drug on the market in the U.S. but to further toughen the Avandia labeling.

The advisory panel vote is not a binding recommendation, and the FDA can choose to ignore its advice. In general, though, the agency doesn't tend to make decisions in opposition to its advisory panels.

Even after the positive ruling, shares of Glaxo are still trading near their 52-week lows. Worldwide Avandia sales will almost certainly continue falling compared to the approximately $3.5 billion in sales the drug in all of its forms brought into Glaxo last year, but it's important to remember that the drug accounts for less than 10% of all of Glaxo's revenues.

In its second-quarter financial results released last week, Glaxo also announced that sales of the Avandia franchise products were down 22% year over year. Investors shouldn't overreact to the reduced prospects for Avandia, though. Glaxo has other compounds, like its cervical-cancer vaccine Cervarix (which is on its way to the market), that will likely more than make up for decreased revenue from Avandia.

GlaxoSmithKline is a Motley Fool Income Investor recommendation, thanks to its 4% dividend yield. Find out which other companies pay you to invest in them by signing up for a free 30-day trial today.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.