Scotia shares crash as diabetes drug is rejected

The power of national drug regulators to move markets in pharmaceuticials companies was demonstrated vividly yesterday. Scotia Holdings, the biotechnology group, saw pounds 189m wiped off its market value at one stage after announcing that the British health authorities had declined to clear for sale a diabetes drug. At the other end of the scale, shares in Glaxo Wellcome, the world's biggest drugs group, were spurred on to new peaks after Sweden approved its new Naramig migraine treatment, a follow-on to its blockbuster Imigran drug.

Scotia's shares crashed 245p before recovering to end 135p down at 435p after the company said it had received verbal notification from the UK's Medicines Control Agency that it could not at present recommend marketing approval for Tarabetic, a drug for treating diabetic neuropathy. The MCA is a key part of the process by which the Ministry of Health vets new drugs coming on to the market.

Analysts suggest Scotia's drug could achieve sales of anywhere between pounds 50m and pounds 400m, but David Horrobin, chief executive, suggested the market had overreacted: "This is potentially an important drug, but it is only one of 10 or so projects of equal importance."

The problem follows a meeting of the Committee on the Safety of Medicines, an advisory body to the MCA, which has raised concerns about the drug's efficacy. But Mr Horrobin questioned the expertise of the committee's members, saying none of them was expert in the field of diabetic nerve damage. He claimed the 10 to 15 people in the UK he described as "real experts" in this area were all "very strongly" in favour of the drug.

Yesterday's regulatory setback for Tarabetic came as Glaxo Wellcome saw its shares rise 36.5p to a new high of 1,154p, partly on hopes for itsNaramig migraine treatment, formerly called naratriptan. The approval by the Swedish Medical Products Agency means it will compete in Europe with Zeneca's Zomig, which it was announced yesterday haswon UK approval.

Glaxo is confident the new treatment will not compete with its Imigran drug, which it claims is used by only 7 per cent of migraine sufferers. The clearance is the first stage to marketing a drug which analysts suggest could reach sales of pounds 200m by 2000.

The drug industry has grown used to these moments of despair and elation after enduring a generation of an approval process born of the Thalidomide scandal of the early 1960s. The process of gaining approvals for drugs lengthened until in the 1980s it was taking 12 years from patenting a new compound to getting it on to the market. Since then, a new spirit of commercialism has taken root among the regulators. The all-powerful Food and Drug Administration offers drugs companies the option of paying a "user fee" which can speed up the process.

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