AstraZeneca Says Revamped Pipeline Will Return It To Health, But Pitfalls Remain

Equipped with 19 drug candidates for Phase III trials over the next two years, Britain’s AstraZeneca says it’s finally “on a roll.” But the troubled medicine maker still expects earnings to keep falling in 2014 amid uncertainty over heart drug Brilinta and likely generic competition to Nexium in the U.S.

AstraZeneca PLC used its fourth-quarter update to parade its replenished pipeline, which now includes 11 new molecular entities in Phase III or registration – almost double compared with the previous year.

The upbeat message was dampened though by lackluster U.S. sales of new heart drug Brilinta (ticagrelor) and a $1.76 billion impairment charge taken in 2013’s final quarter, due to disappointing sales of diabetes drug Bydureon (exenatide extended-release), which produced a $524 million net loss for the three-month period. Overall group sales fell 6% in the latest quarter to $6.84 billion, generating “core” earnings, which exclude certain items, down 28% from a year earlier at $1.23 a share.

Still, CEO Pascal Soriot reiterated that the drug maker aims to return to growth faster than generally expected, with 2017 revenues forecast to be in line with 2013. His message, first outlined last month at the J.P. Morgan Healthcare Conference in California, sees new drugs driving the company forward, many of which have been gained through deal-making and acquisitions .

The British company kept busy on the business development in 2013, capping off the year with its largest transaction, buying out Bristol-Myers Squibb Co.’s share in its diabetes alliance, a deal that closed in February. . The JV recently acquired Amylin Pharmaceuticals Inc. to gain the GLP-1 agonists Bydureon and Byetta (exenatide). But uptake of both drugs has disappointed AstraZeneca and its investors.

“The good news is that we feel we can do better with these products in our own hands,” Soriot said on a conference call Feb. 6. “We’re now seeing encouraging signs in market share in the latter part of 2013 and into January and we now have a team that is totally focused on Forxiga (dapagliflozin), exenatide and Bydureon,” he added. Bydureon sales for the year totaled $151 million, below market forecasts. AstraZeneca aims to market a new easier-to-use dual chamber pen for Bydureon in 2014.

Brilinta Uncertainty

Prospects for Brilinta (ticagrelor) – a product that AstraZeneca still hopes to turn into a blockbuster – have become less certain since it was revealed in October that the U.S. Department of Justice is investigating PLATO, the 18,000-patient pivotal trial that supported the drug’s approval. Brilinta sales totaled $92 million in the fourth quarter versus $38 million a year earlier; the drug generated 2013 sales of $283 million.

The company says the U.S. probe is holding back the drug.

“The DoJ is acting on a whistle-blowing case which they have to investigate and we are cooperating with them, and so far the investigation is going as well as we could expect – but even if that investigation concludes positively, in the meantime it’s creating uncertainty and it is impacting us,” Soriot said, adding: “That’s unfortunate for us and it’s unfortunate for patients.”

It adds to a bleak short-term revenue picture. The British drug maker said group sales in 2014 probably will fall by a low-to-mid single digit percentage figure, with earnings per share falling “in the teens,” due to the patent loss on key medicines. The company already is suffering from generic competition to its antipsychotic Seroquel (quetiapine) and expects to lose Nexium (esomeprazole) to generic competition in 2014 – probably in May – followed by Crestor (rosuvastatin) in 2016.

“In the near term, these headwinds will remain challenging. However, I am confident that we can return to growth faster than anticipated,” Soriot said.

The company has responded with ongoing restructuring (Also see "AstraZeneca’s R&D Restructuring Follows Hot Spot Trend" - Pink Sheet, 18 Mar, 2013.). Its Phase 4 restructuring program, announced in March, is now being extended to deliver a total $1.1 billion of annual benefits, and envisions a loss of 5,600 jobs between 2013 and 2016. The company said it has not yet decided what to do with the additional 4,000 employees it’s taking on by acquiring Bristol’s interests in the diabetes alliance, and discussions on eventual synergies “are at an early stage”, according to new CFO Mark Dunoyer, who joined AstraZeneca in July of last year from GlaxoSmithKline PLC (Also see "Dunoyer Makes Leap To CFO As AZ’s BD Overhaul Continues" - In Vivo, 21 Nov, 2013.).

Bright Spots

One bright spot in the company’s quarter were sales of respiratory drug Symbicort (budesonide and formoterol), which advanced 11% in the quarter, making for an annual 10% gain.

Another was AstraZeneca’s performance in emerging markets, where sales rose 6% in the fourth quarter. Its quarterly sales in China advanced 21% at constant exchange rates during the period.

“China is really a nice story for us,” said Soriot. “We expect our growth rate will continue there and we expect Symbicort to keep growing. Remember, Symbicort is still a small product in China but its potential is enormous.”

The CEO, who has been on the job just over a year, also expects Symbicort to continue to do well in the U.S., where the drug has been taking market share from GSK’s Advair (fluticasone propionate and salmeterol oral inhaler). “What we have seen is a steady growth in our market share there and we’ve had a late acceleration in late 2013 and early 2014,” he noted. “Some patients prefer one formulation over another but there is room for two products in the United States and I’m sure both products can do well there.”

Delivery Now Key

Soriot gave notice not to expect AstraZeneca to maintain the pace and scale of M&A and licensing deals seen in 2013. Instead, 2014 will be a year of developing the assets it acquired.

“Our late-stage pipeline is much stronger than it was a year ago and secondly, we have quite a number of projects that are coming through Phase I and Phase II and our candidates for Phase III, so we are now going to turn our attention to delivering on our late-stage projects but also moving internal projects from Phase II to Phase III. That’s going to be our focus more than licensing or business development.

He did not rule out big deals, but added that the need for business development was not as acute as in early 2013. In fact, the company is now spoiled for choice, he suggested.

“In fact, with our internal projects, we’re going to have to be selective. We have 19 candidates for Phase III starts over the next two years – 2014 and 2015 – and these are clearly a lot. We’re going to be very selective as to what we move into Phase III.”

“We don’t need to do large acquisitions and today we probably need them less than a year ago now that our pipeline is really much stronger. Having said that, if we find a large-scale acquisition that [makes] sense for us and is aligned with what we’re trying to achieve, then we would consider [that], but it is certainly not something we absolutely need to be successful.”

Oncology Highlighted

He said the company will have a very significant level of news flow in 2014, in particular in oncology, where it expects to share data on some key products.

One candidate drug that will be spotlighted is AstraZeneca’s MEDI-4736, anti-PD-L1 antibody.

The company is studying the molecule in combination with anti-CTLA4 monoclonal antibody, tremelimumab. Another combination trial using MEDI-4736, an immuno-oncology drug, will be in partnership with GSK using that company’s BRAF and MEK inhibitors. “We’ll be giving a full update on where we are with this program and we do anticipate that this will start Phase II registration trials this year,” said Briggs Morrison, who leads AstraZeneca’s global late stage development program.

Another oncology asset that AstraZeneca is excited about is AZN9291, a molecule for the treatment of patients who have non-small cell lung cancer driven by mutations in the EGFR receptor and which will start Phase III registration trials this year.

Morrison also singled out for interest roxadustat/FG4592, a molecule AstraZeneca is developing with FibroGen Inc. for treating anemia by increasing red blood cell mass.

Soriot summed up by saying, “We are going through a transition – and we are on a journey – but our science is strong and it’s beginning to show through and 2014 is the year we have to focus on execution so by 2017, we can see revenues that are broadly in line with 2013. That is our goal.”