AstraZeneca shares plunge 16% as lung cancer study fails

The two injectable immunotherapy drugs failed to help patients in an advanced lung cancer trial

AstraZeneca's combination of two injectable immunotherapy drugs failed to help patients as hoped in a closely watched advanced lung cancer trial, sending its shares plunging on Thursday.

The so-called MYSTIC study was the most anticipated clinical experiment in the pharmaceutical industry this year and the news saw the shares tumble more than 16 percent, wiping $14 billion off the company's value in their biggest ever daily fall.

The study was seen as key to proving the value of the group's new drug pipeline and its future as an independent company after it spurned a $118 billion takeover attempt by Pfizer in 2014.

Uncertainty about the MYSTIC outcome had been heightened recently by speculation that Chief Executive Pascal Soriot might be considering a highly paid new job as head of Israel-based Teva Pharmaceutical Industries.

Soriot declined to comment directly on what he described as "rumours" on Thursday, while company insiders said he would have had to make a statement if he had firm plans to leave.

"I'm not a quitter," Soriot said, adding he was proud to lead AstraZeneca and was committed to delivering on the strategy of returning the company to growth. "The only thing I can tell you is I am here today."

Initial results from MYSTIC found the combination of durvalumab and tremelimumab was no more effective at stopping disease progression than chemotherapy in patients expressing a protein called PD-L1 on 25 percent or more of their cancer cells.

Immunotherapy drugs are designed to help the body's immune cells kill cancer and PD-L1 levels are widely used as a benchmark to determine if they are likely to work for individual patients.

As a secondary endpoint, although not formally tested, durvalumab monotherapy also would not have met a pre-specified threshold of progression-free survival benefit, the company added. Durvalumab is already on the market for bladder cancer, under the brand name Imfinzi.

Despite the negative initial results on disease progression from the MYSTIC trial, Soriot said there was still a chance the treatment might show a benefit when overall survival data becomes available in 2018.

Good News for Merck?

Immunotherapies, which boost the immune system's ability to fight tumours, promise to revolutionise cancer care, prompting a race among companies to develop rival treatments. Lung cancer is the single biggest market opportunity.

The setback for AstraZeneca is likely to be good news for Merck & Co, the only manufacturer on the market today with an immunotherapy treatment for previously untreated lung cancer.

But Bristol-Myers Squibb, which is working on a similar combination to AstraZeneca's durva/treme cocktail, could be hit, according to Bernstein analyst Tim Anderson.

AstraZeneca - a relative latecomer in immunotherapy - had been hoping to secure a substantial slice of a multibillion-dollar market by proving its combination could help previously untreated patients with advanced lung cancer.

It has already shown in a separate trial called PACIFIC that durvalumab alone can help some patients with earlier-stage disease.

The news came as AstraZeneca reported drug sales fell again in the second quarter, hit by loss of patents on blockbusters like cholesterol pill Crestor.

Despite income from disposals and external deals, first-quarter revenue fell 10 percent in dollar terms to $5.05 billion, while core earnings per share (EPS) rose 5 percent to $87 cents.

Industry analysts, on average, had forecast revenue of $5.0 billion and earnings of 80 cents, according to Thomson Reuters data.

AstraZeneca reiterated its outlook for the full year that revenue would decline at a low to mid single-digit percentage rate, with core EPS dropping by a low to mid-teens percentage.

There was some better news elsewhere, with the company announcing that its lung cancer pill Tagrisso had significantly improved progression-free survival another clinical trial called FLAURA. Soriot said this put the medicine on track to be a product with eventual sales of more than $4 billion a year.

AstraZeneca has also established a strategic oncology collaboration with Merck to study cancer drug combinations using its drug Lynparza, which is already approved for ovarian cancer but could have much wider uses when combined with immunotherapy.

Merck will pay AstraZeneca up to $8.5 billion under the deal, in exchange for half of future Lynparza sales.