NVS Novartis AG

LONDON—AstraZeneca PLC and Eli Lilly and Co. said they would progress a clinical trial for an Alzheimer's drug after initial human testing showed it didn't have harmful side effects.

The drug, called AZD3293, is a so-called BACE inhibitor, a hot new class of drugs the industry hopes could prevent the onset of Alzheimer's by preventing the buildup of a protein known as amyloid in the brain, thought to be the main cause of the degenerative neurological disease.

AstraZeneca and Lilly said they would progress the drug to a phase three clinical trial. The final stage of testing, in patients with early stage Alzheimer's. They hope to enroll a total of 2,200 patients across 14 countries in the trial. They said they would also start test the drug in patients with mild Alzheimer's in a separate trial set to start enrolling participants in the third quarter of 2016.

BACE inhibitors are the latest glimmer of hope in a field dogged by failures, but they could stumble in later-stage development. Eli Lilly scrapped a BACE inhibitor, LY2886721, in 2013 over concerns that the drug could affect liver function. Research released by the trade group Pharmaceutical Research & Manufacturers of America in 2012 showed there had been 101 Alzheimer's drug failures in the previous 13 years.

It is being co-developed by AstraZeneca and Lilly under a risk-and-reward sharing deal. Under that agreement, Lilly took the lead in designing and running clinical trials for the drug, which was previously under development solely by AstraZeneca. The two will share the costs of development, and, if the drug is successful, future revenues, equally.

Lily also agreed to a series of payments to AstraZeneca as the drug progresses through various milestones. It will pay $100 million now that the drug is moving to late-stage testing.

The deal forms part of AstraZeneca Chief Executive Pascal Soriot's "externalization" strategy to partner with other drugmakers when the program in question falls outside its core areas of expertise.

The high failure rate of research in Alzheimer's disease has led to other partnerships in the industry: last year Novartis AG struck a deal with Amgen Inc.

An estimated 5.3 million Americans suffer from the disease, according to the Alzheimer's Association, a nonprofit organization. Current treatments can help manage symptoms, but there is no cure. The market for Alzheimer's drugs stood at $4.9 billion in 2013 and is expected to reach $13.3 billion by 2023, according to GlobalData, a research and consulting firm.

Write to Denise Roland at Denise.Roland@wsj.com

(END) Dow Jones Newswires

April 08, 2016 04:55 ET (08:55 GMT)

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