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AstraZeneca Falls on Drug Delay

Updated from 10:28 a.m. EDT

Shares of AstraZeneca (AZN - Get Report) skidded Wednesday after the company pushed back its schedule for seeking regulatory approval for an experimental diabetes drug.

At the same time, the company said it was on track to achieve the midpoint of its previous earnings guidance, which had been in the range of $2 to $2.15. The consensus among analysts polled by Thomson First Call was an EPS of $2.08. Analysts had predicted an EPS as high as $2.15 and as low as $1.98

The company's stock dropped $1.14 or 2.8%, to $39.44 on Wednesday.

AstraZeneca said it had not discovered any problems with the drug in question, Galida, which has progressed from phase II clinical studies to phase III testing -- the last step before a drug is submitted to health care regulators. However, the company is extending long-term follow-up clinical studies, citing "worldwide regulatory authority review of the safety and toxicology" of the drug group to which Galida belongs. Follow-up testing will take two years instead of one year, pushing the regulatory application back to 2007.

Galida is part of a class of drugs called PPAR, which analysts have said can be troublesome. For example, Merck (MRK) was working on a PPAR with Japan's Kyorin Pharmaceutical; but Merck halted phase III testing 11 months ago when a safety review program detected rare malignant tumors in mice. "The clinical relevance of these findings in humans is unknown," Merck acknowledged.

Sir Tom McKillop, AstraZeneca's CEO, said Tuesday he had high hopes for Galida and for Cerovive, a stroke treatment. "With Galida, we had over 1,000 patients in our phase II studies, so we've got a lot of experience already," he said in remarks released during an annual meeting with analysts. "Cerovive is already into two big phase III studies. There is a safety monitoring committee ... and they have given no indication of any reason to stop to date."

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