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Major setback for AstraZeneca

Pharma giant AstraZeneca was banking on a key clinical trial for its cancer drugs. It was a flop. What comes next? asks Alice Gråhns.

The pharma giant was banking on a key clinical trial for its cancer drugs. It was a flop. What comes next? asks Alice Grhns.

AstraZeneca's effort to gain ground in the market for immune-system-boosting cancer drugs received a setback last week when its trial treatment for lung cancer disappointed in clinical trials. The shares fell 15% on the news, wiping $14bn from AstraZeneca's value. The trial, named "Mystic", "was one Astra desperately needed to work", says Max Nisen on Bloomberg Gadfly. Now, the drugmaker clings to the hope that more-complete data, due next year, will salvage the programme. But even if the news is good, the firm "has already lost a lot of potential upside in lung cancer", the biggest market for the drugs on trial. Rivals Merck & Co and Bristol-Myers Squibb Co had a year-long start while "Astra tried to play catch-up by focusing on drug combos and with quick trials". (The Mystic trial was testing a combination of its already approved Imfinzi and a second drug.)

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"AstraZeneca's investors knew the company was going over a cliff but it's now doing so without a safety net," says John Foley on BreakingViews.com. The share-price fall, the biggest one-day decline in its history, suggests shareholders had assigned a 60% chance to the therapies taking off, and "the question is whether those lost earnings can be replaced". Revenues are going in the wrong direction, "as competitors to big sellers such as anti-cholestrol drug Crestor eat into its sales", says Iain Withers in The Daily Telegraph. In its half-year results AstraZeneca saw an 11% drop in sales to $10.5bn and a 37% increase in operating profit to $1.8bn. "While sales declines were expected, they highlight the need for AstraZeneca to find replacement blockbusters."

The disappointing trial data leaves the firm vulnerable to a takeover, says Chris Hughes on Bloomberg Gadfly. And "unfortunately for investors, the UK drugmaker's management lacks the credibility to mount a strong defence that would force any predator to pay a full price". The shares were trading at around £43 at the end of last week, roughly where they landed after the board fought off a £55 per share takeover proposal from Pfizer in May 2014. "If Pfizer's 2014 takeover had succeeded, AstraZeneca's investors would be enjoying big gains."

Nevertheless, chief executive Pascal Soriot "is not finished as a top-ranking pharma baron", says the FT's Lex column. With the shares still rated above those of rival GlaxoSmithKline, "shareholders should sit tight for the moment. So should Mr Soriot".

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