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AstraZeneca Ends Galida Program

The company says the diabetes drug probably wouldn't be significantly better than current medications.

AstraZeneca

(AZN) - Get Report

halted work on a diabetes drug called Galida, saying that it probably wouldn't offer patients "a significant advantage" over existing medications.

"We have acknowledged that Galida was in a class with a high degree of uncertainty, and the decision to discontinue is disappointing," David Brennan, the company's CEO, said Thursday. "We remain committed to further strengthening AstraZeneca's pipeline of new medicines both from our own research efforts and through the continued pursuit of external opportunities to enhance our business."

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Analysts weren't betting heavily on Galida, and the stock fell only 26 cents to $54.58 by early afternoon. However, the drug's cancellation highlights what some analysts say is AstraZeneca's biggest weakness -- a paucity of promising new products in late-stage clinical development.

Though the company is seeking regulatory approval for new uses of existing drugs, no applications for experimental treatments are scheduled for filing with the Food and Drug Administration this year. In October, AstraZeneca asked the FDA to approve Symbicort, an asthma drug already available in 93 foreign markets.

Next year, AstraZeneca expects to seek FDA approval for a stroke drug and a drug to prevent the build-up of fat and calcium in arteries. Both were developed by other companies. Otherwise, all of AstraZeneca's FDA applications for experimental products are scheduled for 2008 or later.

The company decided to stop work on Galida after reviewing the results of four Phase 3 clinical trials and one Phase 2 trial. Phase 3 is the last round of clinical testing before a company submits a product for regulatory review.

After talking to outside experts, the company concluded that "the overall benefit/risk profile is unlikely to offer patients significant advantage over currently available therapy."

AstraZeneca also says certain tests exhibited a signal for potential kidney problems. It added that "there is no immediate safety concern" for the 2,245 patients in the clinical trials. Tests showed Galida was effective in controlling blood-sugar and cholesterol levels, but they also found an increase in the level of serum creatinine in the blood. Serum creatinine is a waste product. If the level is too high, it can indicate impaired kidney function, a urinary tract obstruction or congestive heart failure.

"The magnitude of the serum creatinine elevation was greater than anticipated based on earlier clinical studies," AstraZeneca says. When patients stopped taking the drug, the levels dropped. The clinical trials also showed a decrease in a measurement of kidney function that's linked to the serum creatinine level.

AstraZeneca says it's conducting research on similar diabetes compounds.

The company's decision wasn't a surprise, says Mark Purcell of Deutsche Bank. In a research note, he points out that executives made cautionary comments about Galida a few months ago and that "significant risk" was associated with other drugs in the same class. He reaffirmed his buy rating on AstraZeneca.

Cancelling Galida "merely removes a high-risk upside option from our AstraZeneca thesis," says Purcell, who's counting on experimental stroke and heart-disease drugs to help the company. He doesn't own shares, but his firm says it does and seeks to do business with companies analyzed in its research reports.

The failure of Galida illustrates the difficulty companies have in developing a class of drugs known as dual PPAR alpha/gamma agonists. PPAR is an acronym for peroxisome proliferator-activated receptors.

In recent years, several companies have halted work on these drugs.

Merck

(MRK) - Get Report

ended a late-stage clinical trial in 2003 after detecting rare, malignant tumors in mice. But the biggest PPAR setback belongs to

Bristol-Myers Squibb

(BMY) - Get Report

and its drug Pargluva.

Bristol-Myers had planned to market the drug with the help of Merck. That changed last October, when the company said the FDA would delay acting on the drug because the agency wanted more information about ongoing clinical trials that were examining Pargluva's cardiovascular safety. A few days later, the company said it figured the FDA's request

would necessitate more clinical tests that could take up to five years.

The company said it might discontinue work on the drug. Merck dropped out of the partnership. Bristol-Myers hasn't provided any updates, and analysts aren't counting on Pargluva.