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AstraZeneca to Return Fostamatinib Rights

Zacks Equity Research

AstraZeneca (AZN) recently announced its decision to return the rights to its rheumatoid arthritis (:RA) candidate, fostamatinib to Rigel Pharmaceuticals, Inc. (RIGL). AstraZeneca took this decision based on mixed data from the OSKIRA phase III program and will no longer pursue regulatory filings for the candidate.

The OSKIRA phase III program comprised of three phase III studies: OSKIRA-1 (n ~ 900), OSKIRA-2 (n ~ 900) and OSKIRA-3 (n ~ 320). The studies evaluated two dosing regimens of fostamatinib, 100 mg twice daily and 100 mg twice daily for four weeks followed by 150 mg once daily in RA patients who had responded inadequately to currently approved therapies such as disease modifying anti-rheumatic drugs (DMARDs) including methotrexate (OSKIRA-1 and OSKIRA-2) and TNF-α antagonists (OSKIRA-3).

As per top-line results from OSKIRA-2, fostamatinib demonstrated statistically significant improvement in the signs and symptoms of RA, measured using American College of Rheumatology (:ACR) 20 response rates, in combination with DMARDs versus placebo in both dosages.

In OSKIRA-3, while fostamatinib in combination with methotrexate showed statistically significant improvement versus placebo, in 100 mg twice daily arm it failed to do so in the other.

In Apr 2013, mixed data from the OSKIRA-1 study was announced. The study evaluated fostamatinib in combination with methotrexate. While fostamatinib demonstrated significant improvement in ACR 20 response rates, it did not show a statistically significant difference in modified total sharp score (mTSS).

In the phase III studies fostamatinib was found to be generally safe and well tolerated. We remind investors that AstraZeneca was collaborating with Rigel Pharma for the worldwide development and commercialization of fostamatinib since Feb 2012.

AstraZeneca’s pipeline is currently under severe pressure with revenues plunging due to generic competition faced by several key drugs including Seroquel. The company will face additional pressure once Nexium (2014) and Crestor (2016) start facing generics.

We note that this move does not affect AstraZeneca’s 2013 guidance. AstraZeneca continues to expect 2013 revenue to decline in the mid-to-high, single digit and core earnings to decline considerably more than revenue.

AstraZeneca carries a Zacks Rank #3 (Hold). Companies that currently look attractive include Santarus, Inc. (SNTS) and Salix Pharmaceuticals (SLXP). All the three carry a Zacks Rank #1 (Strong Buy).

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