One miss, one hit seen for AstraZeneca heart drugs

By Ben Hirschler, European Pharmaceuticals Correspondent

LONDON, March 16 (Reuters) - AstraZeneca Plc (AZN.L) shares look set for a bumpy ride in the next fortnight, with positive news expected for cholesterol fighter Crestor but experimental heart drug AGI-1067 widely tipped to fail in a key study.

Clinical trial results on both products are due to be released at the American College of Cardiology annual meeting in New Orleans on March 25 and 27 respectively.

"If it plays out the way the market is expecting, I think overall it will have a negative impact on the stock," UBS pharmaceuticals analyst David Beadle said.

"Everyone expects AGI-1067 to fail but if it does, you've probably still got some downside. Obviously, though, there is an asymmetric outcome here and if it is positive, the stock is going to be trading well above 30 (pounds)."

AstraZeneca shares, which have fallen 19 percent since the failure of another late-stage experimental medicine for stroke last October, were 0.5 percent higher at 28.88 pounds by 1100 GMT.

The Anglo-Swedish company, on a drive to rebuild its pipeline, agreed in December 2005 to pay AtheroGenics Inc AGIX.O up to $1 billion for exclusive rights to AGI-1067, which works in a novel way to stop the plaque inside arteries that can lead to heart attack and stroke.

"We have categorised it as a high risk product but if it works it will be high reward," AstraZeneca Chief Executive David Brennan told reporters last month.

Analysts reckon it could sell $5 billion a year, if it works. That's a big "if", however, given the inconclusive findings of earlier Phase II tests.

Merrill Lynch sees only a 10 percent chance of success and points out the latest Phase III study has a high hurdle rate, since it is designed to detect a 20 percent reduction in deaths and cardiovascular events in patients receiving AGI-1067 versus standard care.

Morgan Stanley says feedback from medical experts suggests a 25 percent probability of success.

BETTING AGAINST

Many investors are already betting heavily against AGI-1067 by selling short stock in AtheroGenics. As of last month, a whopping 51 percent of the U.S. biotech firm's shares had been shorted, according to the Nasdaq.

Short sellers borrow shares for their trades and profit when a stock falls by repurchasing them at a lower price.

Expectations for the AGI-1067 data -- which AtheroGenics said this week it was "hopeful" of having ready in time of the New Orleans meeting -- are likely to overshadow the latest findings on Crestor.

There is little doubt in analysts' minds that the Crestor study will be positive, since AstraZeneca has already filed the results -- along with findings from two earlier trials -- with regulators to support an expanded label for the product.

The findings of the so-called METEOR study could help AstraZeneca differentiate Crestor in an increasingly competitive cholesterol drug market.

It is seeking to demonstrate that Crestor can reduce blood vessel plaques, not just slow their build up. Citigroup thinks a label with such a claim could help push Crestor's U.S. market share past 8 percent.

Specifically, METEOR is designed to show that Crestor can reduce thickening of the carotid artery wall compared to placebo in patients with low existing risk factors.

A strongly positive result could open up an untapped market in treating asymptomatic patients, according to Deutsche Bank, giving significant upside to its current forecast for Crestor sales of $4.4 billion in 2010. Sales last year were $2 billion.

((Reporting by Ben Hirschler, editing by Rory Channing; email: ben.hirschler@reuters.com; Reuters Messaging: ben.hirschler.reuters.com@reuters.net; +44 20 7542 5082)) Keywords: ASTRAZENECA HEART/

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