Sanofi-Aventis shares suffered their biggest fall since 2002 after a U.S. health panel advised against approving its weight-loss pill Acomplia over concerns it may be linked to thoughts of suicide.
The setback made analysts question the ability of the French drugmaker, led since this year by former R&D head Gerard Le Fur, to bring new drugs to market to boost slowing sales growth and counter rivalry to its products from generic drugs, or whether it needs to buy a rival such as Bristol-Myers Squibb.
In a unanimous vote on Wednesday, an advisory committee said the U.S. Food and Drug Administration (FDA) should reject Acomplia, called Zimulti in the United States, the world's biggest drug market, because of concerns it could increase suicidal thinking and depression.
This is a devastating defeat, I didn't expect it to be such a clear, unanimous recommendation, Vontobel analyst Karl Heinz Koch said. They have to show they have something in their pipeline; apart from Ambien CR (a sleeping pill) and Acomplia in Europe, they haven't launched a drug over the past years.
The FDA, due to decide on Zimulti by July 26, usually follows the panel's recommendation. Several analysts removed their U.S. sales forecasts for the drug and cut their earnings estimates, and did not rule out a restructuring at Sanofi.
More than 30 percent of Americans are overweight and the severely obese form the fastest-growing group of overweight people, research showed earlier this year.
Sanofi had initially hoped to launch Acomplia, chemically known as rimonabant, in the second quarter of 2006 in the United States. The world's third-largest drugmaker, Sanofi has forecast peak annual sales of $3 billion or more for the drug in the past.
Sanofi shares, which have been under pressure from generic patent threats to its blockbuster drugs, bloodthinners Plavix and Lovenox, fell 7.85 percent to 61.98 euros by 1040 GMT after a low of 61.53 -- their biggest percentage fall since late 2002. They have underperformed the DJ health index by 8.5 percent this year.
What does surprise us is the dramatic disconnect between Sanofi's persistent optimistic assessment of the FDA regulatory process for rimonabant and the FDA's clearly negative presentation on the risk-benefit assessment of the compound, Andrew Baum, analyst at Morgan Stanley said in a research note.
The outcome of this meeting will raise further concerns in investors' minds over the integrity of Sanofi's guidance to investors.
Sanofi has been subject to speculation it might buy its smaller rival Bristol-Myers Squibb, which sells Plavix in the United States. Analysts expect Sanofi to wait making a bid until the outcome of a U.S. trial on its Plavix patent later this year.
Acomplia, developed under Le Fur, is a new type of drug that blocks the cannaboid type 1 receptor in the brain to diminish cravings for food. Clinical trials have shown it also improves good cholestorol and blood-sugar levels in diabetics.
Sanofi, which sells Acomplia in 18 countries, said it would work with the FDA to address the panel's decision. The risks were manageable, it said, mainly by warning against use by patients with past or current depression or who are taking antidepressants.
Analysts are awaiting the drugmaker's research and development event in September for more guidance on its pipeline of new drugs.
The panel's recommendation raises questions over Sanofi's pipeline productivity ..., said WestLB analyst Oliver Kaemmerer. This might trigger thoughts on how they are going to move forward with mergers and acquisitions.
He cut his peak forecast for Acomplia sales to around 500 million euros by 2012 from 2.6 billion euros.
Sanofi last year withdrew marketing application for its Multaq heart arrhythmia drug in the European Union after the U.S. health regulator FDA rejected the treatment for approval.
Following Wednesday's U.S. panel opinion, Morgan Stanley cut its share price target to 81 from 86 euros, and Deutsche Bank lowered it to 70 from 76 euros saying that removing U.S. Zimulti forecasts reduced its 2008-2012 EPS estimate by 5-6 percent. ABN AMRO cut its rating to sell from hold and HSBC to neutral from overweight.
The advisory committee said there were too many questions about potential side effects to support U.S. approval.