By Ben Hirschler
LONDON (Reuters) - AstraZeneca is ending development of a rheumatoid arthritis pill that was one of its few late-stage experimental medicines, following disappointing overall results.
The decision is a fresh blow to AstraZeneca's already sparse new-drug pipeline and a bigger setback for Rigel Pharmaceuticals, the U.S. biotech firm that struck a licensing deal for fostamatinib with Britain's second-biggest drugmaker in 2010.
For AstraZeneca, the move will result in a $140 million impairment charge relating to intangible assets, to be taken in the second quarter, although this will not affect its financial guidance for 2013, which is based on "core" earnings.
Scrapping fostamatinib is not a complete surprise, since a series of clinical trials over the past six months have been disappointing, suggesting that the new pill would struggle to compete in an increasingly crowded marketplace.
But it highlights the hazards facing new CEO Pascal Soriot as he bets on new drugs that he hopes can replace revenues from older products, which are losing patent protection.
"Today's news ... reminds investors that the stock carries significant pipeline execution risk," said Panmure Gordon analyst Savvas Neophytou.
AstraZeneca has suffered a number of previous research setbacks, including the 2012 failure of an antidepressant licensed from another U.S. biotech company, Targacept.
Announcing the final batch of late-stage Phase III clinical trial results for fostamatinib on Tuesday, AstraZeneca said it would now return rights to the compound to South San Francisco, California-based Rigel.
Rigel's fortunes are closely tied to the medicine, since it does not yet have any drugs on the market, and its shares fell 7 percent in pre-market Nasdaq dealings.
AstraZeneca was down 0.2 percent by 1015 GMT, underperforming a 0.4 gain in the European healthcare index.
CLEARER RUN FOR PFIZER, ABBVIE
Fostamatinib was seen as a potential competitor to injectable drugs like AbbVie's Humira - the world's best-selling prescription medicine - and a new pill from Pfizer called Xeljanz in a $20 billion-plus market.
Both drugs will now have a clearer run in the lucrative rheumatoid arthritis drug market, although a number of other experimental drugs are also coming through development.
Briggs Morrison, AstraZeneca's global head of medicines development, said the results of late-stage trials did not measure up to the promising results seen earlier in development.
"We remain committed to the search for new treatments for patients with rheumatic and inflammatory diseases with Phase II compounds in rheumatoid arthritis and lupus and Phase III compounds in gout and psoriasis," he added.
Chief executive Soriot has been accelerating a number of new drugs in clinical development, especially in cancer, where AstraZeneca has historically been a major player but has fallen behind rivals in recent years.
One of those is olaparib, which was seen as a failure at one stage but produced promising clinical trial results that were reported at the American Society of Clinical Oncology (ASCO) congress in Chicago at the weekend.
There are also hopes for a clinical trial of its established diabetes drug Onglyza, results of which are expected later this month and may show heart benefits.
Still, the drugmaker needs to find a broad base of winners if it is to offset the looming loss of patents on medicines like Nexium for excess stomach acid and Crestor for high cholesterol - something that will require continuing investment.
AstraZeneca reiterated it expected a slight increase in core operating costs for 2013 compared with 2012 on a constant currency basis.
(Editing by Kate Holton and Mark Potter)