AstraZeneca Ends Work on Stroke Drug

The drug giant's shares sink. Partner Renovis plunges 74%.
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Updated from 9:27 a.m. EDT

AstraZeneca

(AZN) - Get Report

said Thursday it was abandoning work on an experimental stroke treatment after a late-stage clinical trial didn't meet its research goals.

The news overshadowed a strong third quarter in which the Anglo-Swedish drug giant posted earnings of $1.01 a share, a gain of 33% from the 76-cent profit in the same period last year. Analysts polled by Thomson First Call were expecting 95 cents.

Operating profit at $2.11 billion was 24% higher than the year-ago quarter, and sales rose 13% to $6.52 billion. Sales were in line with analysts' expectations.

AstraZeneca also raised its full-year earnings prediction to a range of $3.85 to $3.95 a share. Jonathan Symonds, the chief financial officer, said the final result probably will be in the middle of the range. Analysts had been predicting $3.77. Earlier this year, AstraZeneca forecast a range of $3.60 to $3.90.

However, trading was being driven by the bad news on the research front involving the drug known as NXY-059. AstraZeneca's stock fell $4.95, or 7.5%, to $61.42.

AstraZeneca licensed the drug from

Renovis

(RNVS)

, whose stock collapsed to $3.75, plunging $10.45, or 74%.

With 90 minutes left in the trading day, more than 36 million shares in Renovis had changed hands -- nearly 100 times the normal volume. The average daily volume for the South San Francisco, Calif., biotech company is just above 382,000 shares.

"We are obviously very disappointed by the lack of efficacy shown by NXY-059 in the latest clinical trial," said Corey Goodman, president and CEO of Renovis, in a prepared statement. "Although we will continue to review the results

of clinical trials, we understand AstraZeneca's decision to discontinue development of NXY-059."

John Patterson, AstraZeneca's executive director of development, told analysts in a telephone conference call that developing stroke drugs is "a very high-risk endeavor," pointing out that the company has been diligent in discussing the difficulties. The drug had been tested as a treatment for acute ischemic stroke, which is caused by blood clots and accounts for about 85% of all strokes.

The setback involving NXY-059 is the third failure in two years for experimental drugs that had been stopped during or after late-stage studies. In October 2004, the Food and Drug Administration rejected the anticoagulant Exanta. Although Exanta was available in some markets, AstraZeneca pulled it earlier this year after a study revealed a heightened risk of liver injury.

Then in May, the company

stopped development of the diabetes drug Galida.

The NXY-059 clinical trial found that the drug didn't provide a statistically significant reduction in stroke-related disability when compared to a placebo. The drug also failed to provide significant neurological improvement based on a standard measurement scale. NXY-059 didn't achieve any statistically significant cutback in bleeding in the brain.

As for AstraZeneca's existing drugs, many performed well during the third quarter, including the cholesterol fighter Crestor, whose sales climbed 62% from last year to $536 million. Sales of AstraZeneca's biggest drug, the severe heartburn and ulcer treatment Nexium, rose 13% to $1.28 billion.

Revenue from the blood-pressure medication Toprol XL gained 7% to $473 million. The drug remains a source of uncertainty because AstraZeneca is in a patent fight with three generic-drug companies. As a result, AstraZeneca said its full-year EPS forecast includes 10 cents a share from Toprol XL over the next two months assuming there is no generic competition. Toprol XL's U.S. patent is set to expire in 11 months.

The company is counting heavily on the schizophrenia drug Seroquel, whose sales rose 19% to $849 million. Last week, the drug received FDA approval as a treatment for patients with depressive episodes with bipolar disorders.

Other big drugs with impressive sales included Armidex for breast cancer, which posted a 24% gain to $382 million, and two asthma drugs, Pulmicort and Symbicort, whose respective sales of $263 million and $274 million represented 11% gains over the same period last year.