(AZN) AstraZeneca’s Forxiga Gets EU Approval

Recently, AstraZeneca (AZN) and Bristol-Myers Squibb (BMY) announced that their type II diabetes candidate, Forxiga (dapagliflozin) has received European approval. The European Commission (EC) approved the once-daily oral product for improving glycemic control in type II diabetes patients above 18 years along with lifestyle management and other glucose-lowering products, such as insulin. Forxiga can be used as a monotherapy in patients who are intolerant to metformin.

The EU approval did not come as a surprise as earlier in April 2012 the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) had issued a positive opinion regarding the approval of Forxiga in the EU.

We note that the regulatory path for Forxiga has been quite diverse as far as approval in the US and EU is concerned. The candidate received a complete response letter (CRL) in the US in January 2012.

The diabetes market, while crowded, represents significant commercial potential. Key players in the diabetes market include Merck (MRK), Eli Lilly (LLY) and Novo Nordisk (NVO) among others.

Neutral on AstraZeneca

We are encouraged by AstraZeneca’s focus on the high-potential emerging markets. We are pleased with its efforts to expand its pipeline and portfolio through mergers and acquisitions.

The Ardelyx agreement, Ardea acquisition, the Amgen (AMGN) collaboration and the expansion of the diabetes alliance with Bristol-Myers, all these represent the company’s efforts in this direction. We expect more such deals in the near term.

However, we remain concerned about the generic competition faced by the company’s key products. In 2011, the company lost revenues worth almost $2 billion to generic competition. The weak late-stage pipeline at AstraZeneca coupled with the slow Brilinta uptake also bothers us.

We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run.
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