A confidential independent investigation into Zeneca's drugs pipeline, believed to have been prepared by accountants KPMG, has concluded that the UK's third-biggest drug group is suffering from a serious shortage of late-stage drugs, threatening future growth, according to sources close to Zeneca.
At a presentation yesterday updating analysts on its research programme, the company moved to quash investors' concerns over the quality of its drug pipeline in the face of key drug patent expiries, saying it had "plenty of fuel in the tank" to take the company into the next decade.
While shares in Zeneca jumped 60p to 1,950p on a mood of renewed confidence about prospects, Glaxo Wellcome's shares bounced 40p to 1,340p yesterday, despite announcing that it was withdrawing a diabetes drug in the UK after six people taking it had died. The bounce in Glaxo and SmithKline Beecham's share prices yesterday followed unusual selling of the shares on Friday, prompting a Stock Exchange investigation.
At Zeneca's research and development presentation yesterday, Tom McKillop, chief executive officer of Zeneca Pharmaceuticals, acknowledged there were concerns about the group's prospects but said the company planned to double sales in the next few years and with 26 new drug introductions likely in cancer, pain and respiratory disease had "excellent" growth prospects. Mr McKillop said observers were overestimating the risks associated with the US patent expiries on its heart drug, Zestril, in 2001 and cancer drug, Nolvadex, a year later.
Though shares in the company recovered yesterday, having slumped in the past month after ABN Amro Hoare Govett, NatWest and Greig Middleton all questioned the company's prospects, several brokers remained unsatisfied. The main concerns were that Zeneca was short of drugs in late-stage development, that it had failed in its attempt to build a respiratory franchise around Accolate and find a follow-up to Zestril. Others said that the company was hampered by an inward-looking management culture which for many years had resisted looking outside its own research department for ideas.
"Most of what Zeneca has to offer is line extensions on existing products and new formulations," said one analyst. Another criticised Zeneca for failing to forge alliances with biotechnology companies fast enough. However Timothy Dyer at SGST said the results presentation was "better than what people were expecting" and James Culverwell of Merrill Lynch said Zeneca looked cheap compared to the sector.
Glaxo, the UK's biggest pharmaceutical company, said it was voluntarily halting British sales of troglitazone, its new drug to treat the common type II form of diabetes, after six patients taking the drug had died of liver failure. A spokesman for Glaxo said none of the deaths were in the UK, where the drug, branded as Romozin, had been sold since 1 October. Four of those who died were from Japan, where the drug was invented and sold by Sankyo, and two from the US, where the drug, sold as Rezulin, is co-marketed by Warner Lambert and Sankyo. Last month, Warner Lambert and Sankyo were forced to put a label on Rezulin warning doctors in the US to give patients routine blood tests, after 35 reports of liver injuries in patients.
Glaxo said that, since then, there had been 147 incidents of liver disorder, including the six deaths. Glaxo said it became concerned after learning that the first symptoms of liver damage developed on average three months after the drug was first taken. Analysts were unfazed by the news.