AstraZeneca suffers setback as Crestor study fails to convince

Shares in AstraZeneca (AZN.L) fell 2.8% today after the company revealed that its best-selling cholesterol drug Crestor had failed to beat its main rival in a clinical study.

Imaging tests in the ‘Saturn’ study commissioned by AstraZeneca showed that Crestor had a greater impact in reducing fatty deposits in arteries than Pfizer’s Lipitor drug. However, the company admitted the difference was not statistically significant.

AstraZeneca, viewed as a defensive stock that held up well in last month’s market falls, dropped 83p to £28.32 as analysts warned that the findings would prompt them to cut their earnings forecasts.

The comparison with Lipitor – the world’s biggest prescription drug –  is significant because Pfizer’s patent expires in November. AstraZeneca wanted to stress Crestor’s superiority against forthcoming generic rivals from the likes of Ranbaxy and Watson in the US. Crestor is AstraZeneca’s top selling drug achieving $5.7 billion of sales last year.

The consensus of analyst forecasts is for Crestor sales of $7.1 billion by 2015. However, Naresh Chouhan of Liberum Capital, who is negative on the stock, predicted a 5% hit to 2015 earnings as a result of a lower contribution from Crestor.

Dr Mike Mitchell of Seymour Pierce stuck with his ‘reduce’ recommendation with a £28 price target. Although he noted that the full details of the study would not be available until November, the top-line findings had failed to demonstrate the clear benefit of Crestor, he said.

Navid Malik of Matrix also said ‘reduce’ with a £28.06 price target. ‘We see AZN as unable to offset the generic exposure it faces from patent expirations, ongoing poor delivery from its pipeline and an under-weighting in biological drugs.’

Analysts at Jefferies maintained a ‘hold’ with a price target of £26.

Savvas Neophytou of Panumre Gordon was more positive, saying establishing ‘any handle’ over Lipitor was an important step in protecting market share. He maintained a ‘buy’ recommendation and a target price of 36p.

AstraZeneca shares have fallen from £33.90 in the past year but are up from low of £24.53 on 9 August. It made £13 billion in pre-tax profits last year, forecast to fall to £12.7 billion according to data from Thomson Reuters. The shares currently trade on a prospective yield of 5.7% and are a key holding in many funds, including the Invesco Perpetual Income and High Income funds run by Neil Woodford.

Citywire Verdict:

Leading investors like Neil Woodford and our own Smart Investor like AstraZeneca for its strong balance sheet, resilient earnings and good dividend. While the news once again demonstrates the pressure on major pharmaceuticals to maintain a pipeline of new drugs, it is not a reason to give up on the stock's defensive qualities right now.