(AZN) AstraZeneca Sees Pipeline Setback For Chemotherapy Drug Candidate

March 9th, 2010

AstraZeneca (AZN) has received a pipeline setback with a mid-stage candidate failing to meet the primary endpoint of its study. The company was evaluating the effectiveness of Recentin (cediranib) in a phase II/III study (Horizon III) compared with Roche’s (RHHBY) Avastin (bevacizumab), both in combination with chemotherapy in patients with first-line metastatic colorectal cancer (mCRC).

AstraZeneca is conducting another study with Recentin (Horizon II) in first-line mCRC. The effectiveness of the drug in combination with chemotherapy is being studied against chemotherapy alone. AstraZeneca is awaiting data from this study, which is expected shortly, before taking a final decision on its regulatory filing. In addition, results from a phase III study evaluating the effectiveness of Recentin in treating recurrent glioblastoma are expected in the first half of 2010.

AstraZeneca also reiterated its financial guidance for 2010 and the roadmap for the next few years, provided along with 2009 results. The company has outlined a tough scenario for 2010 and expects core earnings per ADS in the range of $5.75?$6.15. Although the guidance is in line with the Zacks Consensus Estimate of $6.00 per ADS, it is lower than $6.32 reported in 2009. Moreover, due to the potential loss of market exclusivity of Arimidex and Pulmicort Respules in the US, the company expects a mid single-digit decline in revenue based on constant exchange rates (CER) in 2010.

AstraZeneca is facing a number of challenges as many of its products are slated to lose patent exclusivity in the next few years. Although the restructuring measures announced by the company should improve its bottom line in the near-term, it will not be sufficient to compensate for continued revenue deterioration beyond 2010. This puts significantly greater pressure on AstraZeneca to commercialize its late-stage pipeline.

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