UPDATE 2-AstraZeneca pulls submissions for lung cancer drug

* Withdraws Zactima plus chemo in non-small cell lung cancer

* Analysis shows no overall survival benefit

* Blow to pipeline, though Phase III tests will continue * Shares down 1.5 percent

(Adds shares, sales expectations, background)

By Ben Hirschler

LONDON, Oct 28 (Reuters) - AstraZeneca AZN.L has pulled regulatory submissions for its experimental drug Zactima plus chemotherapy as a treatment for lung cancer, dealing a blow to its new product pipeline and hitting its shares.

It had filed the combination as a treatment for advanced non-small cell lung cancer (NSCLC) with U.S. and European authorities in June, and previously highlighted Zactima as an important new submission for 2009.

The decision to withdraw the filings follows an updated clinical analysis that demonstrated no overall survival advantage when Zactima, also known as vandetanib, was added to chemotherapy, the Anglo-Swedish drugmaker said on Wednesday.

Regulators also told the company its existing package of clinical data, which used progression-free survival rather than overall survival as the primary end point, might may not be sufficient for approval.

Shares in the group were down 1.5 percent by 0820 GMT, underperforming a 0.2 decline in the European drugs sector .SXDP, reflecting investor disappointment.

AstraZeneca, which will report third-quarter results on Thursday, badly needs new drugs to replace existing blockbusters that are going off patent. It has recently had a number of successes but the upset with Zactima breaks that good run.

Analysts had been expecting Zactima to reach the market next year, with sales climbing gradually but steadily to a consensus $213 million by 2013, according to Thomson Pharma.

Despite the setback, AstraZeneca said clinical trials had demonstrated that Zactima was clinically active when used with chemotherapy and it planned to complete an ongoing final-stage Phase III trial programme.

Results from two studies using Zactima as monotherapy in selected lung cancer patients and in patients with thyroid cancer are expected in late 2009 or early 2010.

Zactima is one of a series of cancer drugs that starve tumours of blood supply by inhibiting a substance called vascular endothelial growth factor (VEGF), of which the best known is Roche's ROG.VX Avastin. But Zactima also works against two other biologicial pathways, known as EGF and RET. (Editing by Greg Mahlich)