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AstraZeneca shares dive after failure of key lung cancer drug trial AstraZeneca shares dive after failure of key lung cancer drug trial
(about 3 hours later)
Shares in AstraZeneca have slumped by 15%, wiping nearly £10bn off the value of the pharmaceuticals group after the failure of a key lung cancer drug trial. More than £10bn has been wiped off the market value of AstraZeneca after the failure of a key lung cancer drug trial sent its shares plunging by more than 16%.
Initial results from the study, known as Mystic, showed a combination of two injectable drugs, durvalumab and tremelimumab, was no more effective at stopping disease progression in affected patients than chemotherapy. The failure heaped further pressure on Pascal Soriot, the chief executive of Britain’s second-biggest pharmaceuticals company, as the study formed a key part of his promise to rebuild its drugs pipeline after rejecting a $118bn (£69bn) takeover bid from US rival Pfizer in 2014.
The clinical study was seen as key to proving the value of the group’s new drug pipeline. Uncertainty about its outcome has been heightened by recent speculation about the tenure of the chief executive, Pascal Soriot. The shares suffered their biggest daily fall to as low as £42.60 at one point. They have been under pressure in recent weeks after a report that Soriot was close to joining the Israeli generic drugs company Teva.
“Despite the outcome of the initial readout, we must be patient as the Mystic trial continues as planned to evaluate overall survival,” Soriot said. He refused to comment directly on the “rumours”, but stressed: “I’m not a quitter.”
Immunotherapies, which enhance the immune system’s ability to fight tumours, promise to revolutionise cancer care, prompting a race among companies to develop rival treatments. Lung cancer is the biggest market opportunity. Soriot added: “I’m impressed with the progress we’ve made. I’m proud to be the CEO of this company and I’m looking forward to continuing on our journey ahead ... I’m committed to delivering our strategy of returning to growth.”
The news on Thursday came as AstraZeneca reported that drug sales fell again in the second quarter, hit by a loss of patents on blockbusters such as the cholesterol pill Crestor. Initial results from the closely watched Mystic drug study showed that a combination of two injectable drugs, durvalumab and tremelimumab, was no more effective than chemotherapy at preventing disease progression in affected patients.
Despite income from disposals and external deals, first-quarter revenue fell by 10% in dollar terms to $5.05bn (£3.8bn), while core earnings per share – the closely watched measure of profitability – rose by 5% to 87 cents. Soriot said the trial would continue to assess overall survival and noted: “It takes time for immuno-oncology products to have an effect. The drug works, but it takes longer. It doesn’t behave like chemotherapy.”
Industry analysts, on average, had forecast revenue of $5bn and EPS of 80 cents, according to Thomson Reuters data. However, City analysts are doubtful that the final results from the Mystic trials in 2018 will be much better for a therapy that was forecast to have peak sales of $4bn in 2023.
AstraZeneca reiterated its outlook for the full year that revenue would decline at a low to mid single-digit percentage rate, with EPS dropping by a percentage in the low-to-mid teens. Ketan Patel, a fund manager at EdenTree Investment Management, said: “It is difficult to think of a time when a large-cap pharmaceutical company has suffered such a large setback in share price in one day. This pipeline failure will only add further pressure on Pascal Soriot, who promised much when he rebuffed a premium bid by Pfizer in 2014.”
There was some better news elsewhere, with the company announcing positive results with its lung cancer pill Tagrisso. Drug companies are racing to develop immunotherapies, which enhance the immune system’s ability to fight tumours and promise to revolutionise cancer care. Lung cancer is seen as the biggest market opportunity.
The setback came as AstraZeneca reported another drop in revenues in the second quarter, hit by a loss of patents on blockbuster medicines such as the cholesterol pill Crestor.
Revenues fell by 8% at constant currencies to $5.05bn in the second quarter, while core earnings per share – a closely watched measure of profitability – rose by 6% to 87 cents. AstraZeneca made a pretax profit of $492m compared with a $30m loss a year earlier.
The company reiterated its outlook for the full year that revenue would decline at a low to mid single-digit percentage rate, with EPS dropping by a percentage in the low-to-mid teens.
In better news, the company announced positive trial results for its lung cancer pill Tagrisso.
It also unveiled a collaboration with US rival Merck to study cancer drug combinations using AstraZeneca’s treatment Lynparza, which is approved for ovarian cancer, but could be used for other types of cancer when combined with immunotherapies. Merck will pay AstraZeneca up to $8.5bn in exchange for half of future Lynparza sales.