Reason for LLY's strength today:
Novo Nordisk Drops Osteoporosis Drug; Shares Plunge (Update2)
Bloomberg News
September 28, 1998, 8:21 a.m. ET
Novo Nordisk Drops Osteoporosis Drug; Shares Plunge (Update2)
(Adds largest one-day drop in 2nd paragraph, analyst's
comment in 4th, details from 15th.)
Copenhagen Sept. 28 (Bloomberg) -- Shares in Novo Nordisk
A/S, the world's No.1 diabetes-care company, plunged as much as
15 percent after Novo abandoned an osteoporosis drug it was
developing to try to lessen its reliance on diabetes treatments.
The shares fell as much as 135 kroner to 765 kroner
($103.90), their biggest ever one-day drop. Novo said Saturday
it was no longer developing Levormeloxifene, a drug aimed at the
$2.3 billion-a-year market to treat and prevent osteoporosis,
even after the biggest clinical trial Novo had ever undertaken.
The drug, one of a class called selective estrogen receptor
modulators, would have rivaled Eli Lilly & Co.'s market-leading
Evista. U.K. drugmaker SmithKline Beecham Plc is also developing
a product in the same drug class. Broker HSBC James Capel had
said Novo's drug might reach peak sales of $370 million.
''It's a serious blow: it removes a potential considerable
contribution to future sales and makes Novo even more dependent
on NovoNorm,'' said Peter Laing, an analyst at SG Securities,
referring to the company's NovoNorm tablet for type 2 diabetes.
''Finally, the cost of having to license a new product could eat
into the money reserved for their share buyback,'' said Laing,
who revised his verdict on Novo shares to ''hold'' from ''buy''.
Novo, Denmark's largest drugmaker, said last month it will
spend as much as 5 percent of its market value buying back
shares.
Side Effects
The company told clinical investigators at a meeting in
Atlanta Saturday that phase three trials on the drug were
stopped after studies showed adverse gynecological side effects.
About 200 million women in the world suffer from osteoporosis, a
disease particularly affecting post-menopausal women which makes
their bones extremely brittle.
''Obviously, this is a big disappointment for us, since
Levormeloxifene was our largest clinical trial ever, and it's a
setback for our whole women's health-care division,'' Lars
Rebien Soerensen, head of Novo's health-care arm, said in an
interview. ''Currently, we have no other women's health products
in clinical development, so now we'll try to fill our pipeline
by advancing development of pre-clinical compounds or try to
license compounds for development.''
Novo is now pinning its hopes in the women's-health market
on Activelle, a hormone-replacement-therapy drug, which it plans
to launch in Europe later this year. Still, it will be competing
against more advanced drugs such as Evista.
Trials revealed Levormeloxifene increased patients' chances
of suffering urinary incontinence and utero-vaginal prolapse,
both of which tend to affect elderly women.
Development Costs
Novo began clinical trials of Levormeloxifene in 1995, and
approved the start of expensive phase three trials in November
1997. The company has spent between 600 million and 1.2 billion
kroner ($94 million to $188 million) to develop Levormeloxifene,
according to a survey of analysts by newsletter Mandag Morgen
last month. It will incur further costs for shutting down the
phase three trials.
Soerensen said he doesn't expect litigation resulting from
side-effects users encountered when taking the drug.
The company said it will make provisions for the project's
termination in the third quarter of 1998. Its expectations for
1998 operating profit remain unchanged, it said.
''In the short term, we'll save money because now we don't
have to spend on marketing and further development, but we'll
lack the income expected from 2003 onwards,'' Soerensen said.
''Still, our short-term financial outlook isn't changed by this,
and I don't see it affecting our 3-billion-krone share
buyback.''
Reliance on Insulin
Levormeloxifene was intended to beef up Novo's range of
products outside the field of insulin and other diabetes
treatments, which accounted for 4.654 billion kroner, or 72
percent, of total health-care sales in the first half of 1998.
Other health-care products it sells include NovoSeven, a
product used by hemophiliacs and sold in the European Union and
Japan and awaiting clearance to be introduced to the U.S.;
Norditropin, a drug used for the treatment of growth disorders;
and women's health drugs such as Activelle, Estrofem/Innofem and
Vagifem.
''I was surprised by the announcement to terminate
development of Levormeloxifene,'' said Palle Holm Olesen, a
health-care analyst at Nykredit Bank A/S. ''The decision leaves
the company's women's health-care division significantly
weakened.''
Health-care sales made up 75 percent of Novo's first-half
sales, with the remainder of its 8.684-billion-krone revenue
coming from sales of enzymes. Novo is the world's largest maker
of industrial enzymes used in detergents, bakeries and
breweries.
''Of course we would have liked to lessen our dependence on
insulin,'' Soerensen said.
Earlier this year Novo said it expects revenue of 300
million to 350 million kroner this year from U.S. sales of
Prandin, a tablet for treatment of type 2 -- or old-age --
diabetes. That was below some analysts' estimates, considering
the success of Rezulin, a rival drug sold by Warner-Lambert Co.
Novo will market Prandin in the European Union later this year
under the name NovoNorm.
The company's shares have fallen as much as 36.3 percent
from their March 31 record of 1,200 kroner, compared with a 20
percent drop in Denmark's benchmark KFX index, in which Novo is
the second-largest component.
--David Bentow in the Copenhagen bureau (45) 33 32 21 21 with |
