Wednesday, June 19, 2013

For AZ's Onglyza SAVOUR is not a saviour

AstraZeneca has suffered another drug trial setback. Its diabetes drug Onglyza, developed with Bristol-Myers Squibb, failed to reduce heart risks or strokes in a large scale clinical trial. Despite investor hopes, the Savor trial showed the drug was no better than placebo or standard treatments.

 Panmure Gordon analyst Savvas Neophytou issued a hold recommendation on the shares, which have dipped 2.5p to £32.48, saying: AstraZeneca's eagerly anticipated Savor trial has read out without success in providing a differentiation on cardiovascular risk for diabetes product Onglyza.

This disappointment should be moderated by relatively undemanding consensus forecasts for the product. We make no changes to forecasts but note another missed upgrading opportunity. The company's investment thesis moves on to the registration application for another diabetes product Forxiga (dapagliflozin) in the US which the company should file in the coming few days. With Crestor market exclusivity coming to an end in many territories (coming to a crescendo in 2016 with the US), the company needs to start delivering in its pipeline. A number of assets have been rushed through to pivotal trials and this may spring up nice surprises but risk remains high in our view. Valuation is undemanding so some investors will find this an attractive turn-around story.

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