In a severe setback for a company that has stopped development of several drugs over the past two years, AstraZeneca Plc (AZN) said Thursday it's terminating development of its experimental stroke drug NXY-059 after it didn't reveal any benefit in a trial.
The drug failure leaves AstraZeneca, which is one of the world's biggest pharmaceutical companies, with only one potential blockbuster drug in late-stage development.
Lacking a significant number of drugs that will be able to compensate for declining sales once its bestsellers lose patent protection, AstraZeneca will now probably look even more aggressively for opportunities to buy the marketing rights to drugs developed by smaller companies, analysts said.
Speaking to reporters during a conference call, AstraZeneca Executive Director of Development John Patterson said the latest setback won't change the company's strategy of bolstering its pipeline through in licensing and acquisitions.
"We have made quite clear that we saw this as a high-risk project," Patterson told reporters.
Navid Malik, an analyst with London-based brokerage Collins Stewart, said that while AstraZeneca can maintain short-term growth by continuing its cost cutting strategy, "it desperately needs to bring new products to the market, without which no amount of cost cutting will help future earnings growth."
AstraZeneca shares slumped on the news. At 0832 GMT, they were down 4.5%, or 159 pence, at 3370p in a broadly higher London market.
Patterson said the study had proved that drugs like NXY-059, which aim to protect the patient's brain from further damage after a stroke, don't work.
"This is a sad day for patients with ischemic stroke, and a sad day for us," he said.
Analysts at Deutsche Bank AG had forecast peak sales of around $750 million for the drug, which was in an intermediate phase of development.
"The setback is likely to prompt investors to question the breadth and risk profile of the late-stage pipeline, as well as any impact the setback will have on AstraZeneca's in-licensing and mergers & acquisitions strategy," Deutsche Bank analysts said in a note to investors.
NXY-059 was licensed under a 15% royalty pact from Renovis Inc. (RNVS). AstraZeneca will now hand back the rights to the drug to Renovis, Patterson said.
Shares in Renovis, a biotech company headquartered in San Francisco, California, closed at $14.21 in New York Wednesday.
AstraZeneca is now left with a very thin pipeline after the recent expensive failures in late-stage testing of drugs such as blood-thinner Exanta, lung cancer drug Iressa and Galida for diabetes.
AstraZeneca's costs associated with discontinuing NXY-059 will be small at around $12.5 million, Patterson said.
Dropping the drug from the pipeline leaves AstraZeneca with just one other potential blockbuster in development: cardiovascular drug AGI-1067, which is in phase III testing, the latest step in development before a drug can be filed for regulatory approval.
Sanford Bernstein analyst Gbola Amusa said AstraZeneca's remaining key drug candidate will be now particularly important for sentiment.
The once-daily treatment for atherosclerosis, a build up of plaque and fat inside arteries, is expected to report results from current phase III trials in the first half of 2007.
AstraZeneca is due to post its third quarter earnings at 1000GMT Thursday.
Analysts expect the company to deliver a strong set of results, driven by key drugs Nexium, a heartburn treatment, and cholesterol-lowering treatment Crestor, which have seen strong prescription growth during the quarter, but also tight cost management.
AstraZeneca third-quarter operating profit is expected to advance 22% to $2.07 billion on sales rising 12% to $6.51 billion.
Company Web Site: http://www.astrazeneca.com
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