AstraZeneca Shares Dive After Major Setback Over Cancer Drugs -- 3rd Update
July 27 2017 - 10:05AM
Dow Jones News
By Denise Roland
LONDON -- AstraZeneca PLC reported disappointing results for a
closely watched lung cancer drug trial, wiping away almost $14
billion of market value Thursday and raising fresh questions about
the company's growth plans.
The trial, dubbed Mystic, aimed to show that the combination of
two of AstraZeneca's immuno-oncology drugs -- designed to boost the
immune system's ability to attack cancer cells -- could increase
their individual disease-fighting prowess. AstraZeneca said
Thursday the trial instead showed the combination was no better
than standard chemotherapy at shrinking tumors in newly diagnosed
advanced lung cancer.
The test was seen as an important milestone in Chief Executive
Pascal Soriot's go-it-alone strategy, outlined after he rebuffed
Pfizer Inc.'s 2014 takeover offer that was worth $120 billion at
the time. Rejecting the rich premium that went along with that
offer, he promised AstraZeneca's research and development pipeline
would supercharge revenue over the next decade.
Dr. Soriot has also touted the drug-combination approach as a
competitive edge that could help it take on immuno-oncology market
leaders Merck & Co. and Bristol-Myers Squibb Co.
After the disappointing results, AstraZeneca's shares fell
sharply, trading down 16% in midday London trading.
Adding to investor unease, Dr. Soriot refused to rule out
definitively whether he was leaving AstraZeneca. Earlier this
month, an Israeli news outlet reported he was headed to run Israeli
drug giant Teva Pharmaceutical Industries Ltd. Shares dropped
sharply on the report, though they had recovered those losses,
until Thursday.
AstraZeneca representatives have said they wouldn't comment on
what they described as market rumors and speculation. Dr. Soriot
did the same Thursday.
"I'm not a quitter," Dr. Soriot told reporters after fielding a
handful of questions about whether he was staying or going. "That's
as far as I will go." It is unusual for such a large company to
allow uncertainty over a CEO's tenure to linger this long.
The Mystic setback sows fresh worry about the company's ability
to meet Dr. Soriot's revenue goal, despite a string of successes in
other clinical trials earlier this year that had shored up
confidence in the company's cancer pipeline. As part of his Pfizer
defense, he promised to nearly double revenue by 2023.
Those successes had pumped up AstraZeneca's share price this
year. Last month it briefly touched the GBP55 that Pfizer offered
back in 2014. After Thursday's rout, it is trading well below that
level again.
Dr. Soriot said comparing the share price to Pfizer's offer was
unfair. The Pfizer deal was structured as an "inversion," which
would have technically relocated the tax residence headquarters of
the combined company outside the U.S., where corporate taxes are
lower. Dr. Soriot said subsequent opposition to such deals in
Washington would have made a combination impossible anyway.
"I would wait a little longer before passing judgment on the
share price, " he said.
Sean Bohen, who leads drug development at AstraZeneca, said that
while the result was disappointing, the combination could yet prove
effective in prolonging overall survival. Progression-free
survival, the metric used in the initial result, measured how
effective the treatment was at shrinking tumors. Some other cancer
immunotherapy drugs have failed to improve progression-free
survival, yet extended overall survival.
Still, UBS analyst Jack Scannell said the combination's
prospects were "modest." Citigroup's Andrew Baum said Mystic was
"essentially a failed trial."
Separately, AstraZeneca announced that another of its drugs,
Tagrisso, was more effective than standard therapy at shrinking
tumors in patients whose lung cancer is linked to a particular
genetic mutation known as EGFR.
Astra also said it would share the rights to its ovarian cancer
drug Lynparza with Merck & Co. for $1.6 billion upfront, $750
million in option payments and another $6.15 billion over time
based on development and sales targets. Under the terms of the
deal, the companies will share profits generated from the drug and
work together on developing it to treat other cancers, including
combinations with their respective immuno-oncology drugs. The deal
also gives Merck access to AstraZeneca's experimental lung cancer
drug selumetinib.
The Mystic result came as AstraZeneca said it swung to a net
profit in the second quarter, due to lower spending on research and
marketing, proceeds from several licensing deals, and a favorable
year-earlier comparison. Revenue fell as sales of new drugs
struggled to offset the decline of older best sellers.
The company posted net profit of $477 million, compared with a
net loss of $3 million a year earlier, when AstraZeneca took a
restructuring charge related to job cuts. Revenue dropped 10% to
$5.05 billion. Analysts had expected net profit of $450 million on
revenue of $5.05 billion.
AstraZeneca's top line has been shrinking for several years as
its historic best sellers like the cholesterol-lowering pill
Crestor lost patent protection, allowing cheap copycats to enter
the market. Mr. Soriot has told investors that 2017 will be the
year when sales bottom out.
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
July 27, 2017 09:50 ET (13:50 GMT)
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