Shares in Takeda Pharmaceutical Co Ltd plunged 12 percent -- their biggest one-day fall in 20 years -- after U.S. authorities recommended it stop some trials of cholesterol-lowering TAK-475, one of its most promising drug candidates.
The surprise news led some analysts to cut their ratings on Japan's biggest drug maker and to slash or even eliminate the drug's potential earnings from their estimates for the company.
The U.S. Food and Drug Administration recommended Takeda halt trials with higher doses of the drug after elevated levels of an enzyme that may indicate liver damage were more often found than in control groups. This included severe cases of the complication.
It has also requested additional clinical data before the company submits a new drug application.
The announcement is the worst news in a rough patch for the Japanese pharmaceutical industry on the development front.
Eisai Co Ltd said on Tuesday it would delay its application for approval of E2007, an experimental medicine for Parkinson's disease, pushing its stock 3 percent lower despite the company boosting its annual profit forecasts.
An analysis of one of three late-stage trials showed the drug was no more effective than a placebo in reducing patients' so-called off time when symptoms of the disease return.
Eisai had hoped to submit E2007 by the end of March 2008 but will push that back to the January-March quarter of 2009.
Daiichi Sankyo Co and partner Eli Lilly and Co last week saw their shares dive after they stopped giving their most important experimental medicine, the blood-clot preventer prasugrel, to patients in two small trials because the dosage may need to be changed for certain patients.
Takeda's cholesterol-lowering drug is one of three in late-stage development that the company had hoped would become a big earner to offset expected profit declines after its mainstay diabetes drug Actos loses U.S. patent protection in 2011.
Takeda's shares ended down by their daily limit of 1,000 yen, or 12.4 percent, at 7,060 yen, wiping off some $7.8 billion in market value.
POST-ACTOS STRATEGY UNCLEAR
Liver toxicity is the largest reason for drug withdrawals, Hiroshisa Shimamura, UBS Securities drug analyst said in a report, cutting his rating on Takeda to neutral from buy.
It is unclear which pipeline compound will be able to drive sales post-Actos. We question Takeda management's R&D and publication strategy given that TAK-475 has completed 10 clinical trials enrolling nearly 7,000 patients, he said.
Nikko Citigroup analyst Hidemaru Yamaguchi cut his rating to hold/medium risk from buy/medium risk..
TAK-475 is a squalene synthase inhibitor, a type of cholesterol-cutting drug that has not yet been brought to market.
Analysts believe that Takeda is the only drug maker currently working on the development of such a drug.
Takeda said it would immediately study future plans for TAK-475 in the United States, Europe and Japan. It had planned to submit its new drug application for TAK-475 in the April-June quarter next year.
It said the greater frequency of patients found with elevated liver enzyme levels had so far not been observed with lower doses of the drug.
If it were to reach the market, TAK-475 would be up against Merck & Co. Inc's and Schering-Plough Corp's Zetia and Vytorin.
Sales of Zetia and Vytorin, which combines Zetia and Merck's slightly less potent statin Zocor, rose 26 percent to $1.3 billion in the latest quarter.
Some analysts, however, saw a silver lining in the news, saying that Takeda may increase shareholder returns to keep investors sweet.
We expect share price support to be provided by returns to shareholders and the prospect that urgency will drive the company to more proactively invest its annual 400 billion yen free cash flow in acquisitions, wrote Goldman Sachs analyst Kyoko Sato.
She cut her target price to 8,350 yen from 8,650 yen and maintained her neutral rating on the company.
Takeda's two other key drug candidates, both also in phase III development, are SYR-322, which belongs to a new class of diabetes treatments, and TAK-390MR, a successor to heartburn and ulcer drug Prevacid.
Takeda has said it hopes to file new drug applications in the United States for them by mid-2008.