Bloomberg News

AstraZeneca, Novartis Drug Failures Prompt Sales, Profit Alerts

December 21, 2011

Dec. 20 (Bloomberg) -- AstraZeneca Plc and Novartis AG said drugs in late-stage development for depression and hypertension failed in studies, prompting warnings about earnings and sales forecasts.

AstraZeneca, based in London, said two experimental medicines had disappointing results, leading to a $381.5 million charge in the fourth quarter. Novartis of Basel, Switzerland, said it stopped a test of its Tekturna heart drug for safety reasons and the findings may hurt sales. Sanofi, France’s biggest drugmaker, also said the Aubagio pill for multiple sclerosis failed to beat an older therapy.

The loss of patent protection on medicines could wipe out more than $21 billion in sales next year, with only $4 billion being added from new products, Sam Fazeli and other analysts at Bloomberg Industries wrote in a research note today. AstraZeneca’s sales are projected to fall 8.4 percent in 2012, while Novartis’s revenue may gain 1.3 percent and Sanofi’s 3 percent, according to the analysis.

“The bad results emerged at the same time, but Novartis has been at the top of the leader board for drug launches over the past decade, while AstraZeneca lies more toward the bottom,” said Gbola Amusa, an analyst at UBS AG in London. At Sanofi, aside from the injectable Lemtrada drug for multiple sclerosis, “and perhaps one or two other drugs, there isn’t a lot else that’s cause for excitement in that pipeline.”

AstraZeneca shares fell as much as 3.3 percent in London trading, the biggest intraday decline in six weeks, and were down 2.4 percent to 2,877 pence at 1:05 p.m. Sanofi was little changed at 53.68 euros in Paris, while Novartis fell 0.9 percent to 52.35 Swiss francs in Zurich.

Bayer’s Blockbusters

Bayer AG, the German inventor of Aspirin, bucked the trend, saying four of its drugs in development may become blockbusters, ultimately contributing 5 billion euros ($6.5 billion) to annual revenue. The shares rose as much as 2.9 percent in Frankfurt, and were up 1.6 percent to 45.45 euros at 2:07 p.m.

Blood-thinner Xarelto has the brightest prospects, with peak sales probably exceeding 2 billion euros a year, Leverkusen, Germany-based Bayer said in a statement on its website today. Bayer’s eye drug VEGF Trap-Eye and cancer medicines Alpharadin and regorafenib have blockbuster potential, according to the drugmaker.

“Our pipeline is now beginning to bear fruit,” Chief Executive Officer Marijn Dekkers said in the statement.

AstraZeneca, the U.K.’s second-biggest drugmaker, said core earnings per share for the year will probably be “in the lower half” of a $7.20 to $7.40 forecast, which remains unchanged after the research setbacks.

AstraZeneca’s Misfortune

“AstraZeneca seems to have had more than its fair share of misfortune when it comes to the development pipeline,” analysts at Barclays Capital in London wrote in a note to investors today. “Additional development failures increase the probability that management will reassess the likely return on investment from additional R&D investment and cut costs further.”

The drug Olaparib for ovarian cancer won’t move to the final stage of clinical trials and an advanced study of another medicine for patients with major depressive disorder, TC-5214, failed to meet the main goal of a study, AstraZeneca said earlier today in a statement. The company needs new products to replace revenue lost as patents expire on older medicines. The patent protection on the company’s Arimidex and Casodex cancer drugs expired last year.

“It’s a setback in a pipeline that’s already relatively thin, at a company that does need pipeline products because of the patent expiries on the horizon,” Alistair Campbell, an analyst at Berenberg Bank in London, said by phone today. “There are still some pipeline options, though I have to say my hopes aren’t high for many of those.”

Promising Drugs

Two drugs that show promise are fostamatinib for rheumatoid arthritis and dapagliflozin for diabetes, Campbell said. U.S. regulators in October delayed a decision on dapagliflozin by three months.

Novartis said patients who took Tekturna along with two standard high blood-pressure treatments in the trial, dubbed Altitude, experienced more non-fatal strokes and kidney complications. The company will stop promoting Tekturna, also known as Rasilez, in combination with those two types of drugs as a “precautionary measure.”

The setback with Tekturna, which was being studied in diabetics with renal impairment, may hurt sales of the medicine, the Swiss company said today in a statement. Revenue from Tekturna, which was first approved in 2007, was $449 million in the first nine months of the year.

Pill vs Injection

Sanofi said its experimental pill Aubagio failed to beat Merck KGaA’s injected therapy Rebif at preventing relapses or keeping patients on treatment.

Almost half of the patients receiving the lower dose of Aubagio either had a relapse or stopped taking the drug, compared with 37.8 percent at the higher dose and 42.3 percent for Rebif patients, Sanofi said. Annual relapse rates weren’t distinguishable between those taking Rebif and those taking the higher dose of Aubagio, and was higher in the low-dose group, the company said.

The Tenere trial is the second completed study of five planned for Aubagio in MS, Sanofi said.

--With assistance from Naomi Kresge in Berlin. Editor: Kristen Hallam, Marthe Fourcade.

To contact the reporters on this story: Makiko Kitamura in London at mkitamura1@bloomberg.net; Simeon Bennett in Geneva at sbennett9@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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