AstraZeneca's Future May Rest on Mere Milligrams

FDA dosage restrictions could crimp its promising Crestor

It should have been cause for celebration. On June 5, Britain's AstraZeneca PLC (AZN ) got word that the U.S. Food & Drug Administration was close to approving the company's new cholesterol-lowering medicine, Crestor. But instead of bidding up AstraZeneca's stock, investors bailed out, sending the shares down 11%. The stock has since recovered some, but is still not trading at its previous levels.

What's going on? Investors think the FDA will be hypervigilant about approving new cholesterol-fighting drugs in the wake of Baycol. That drug, produced by Germany's Bayer, had to be pulled from the market last year after it was implicated in more than 100 deaths worldwide. To avoid a repeat of that disaster, U.S. health authorities may allow Crestor to be prescribed only in low dosages. It comes down to mere milligrams, but the FDA's decision could determine how quickly AstraZeneca's new treatment turns into the multibillion-dollar blockbuster investors are hoping for.

Certainly, no other drug is as critical to AstraZeneca's future success as Crestor. CEO Tom McKillop is counting on it to offset declining sales of its ulcer medicine Prilosec--until recently the world's best-selling drug--which now faces generic competition in most markets. Ranked the world's fourth-largest drugmaker, AstraZeneca will post a pretax profit of $3.9 billion in 2002, on sales of $17 billion, according to Danske Securities in Stockholm. "Crestor will be an important new drug for us, and we expect to get a significant share of this huge untapped market," says McKillop.

The 55-year-old Scot is not exaggerating about Crestor's potential. With more than 40 million Americans alone suffering from high cholesterol, sales of statins (also called lipid-lowering drugs) are running at around $19 billion annually, double what they were three years ago, and are forecast to grow by 9% a year through 2006. By then, statins will account for more than one-fifth of the global pharmaceutical industry's growth.

Analysts figure if all goes according to AstraZeneca's plan, Crestor may eventually lay claim to nearly a quarter of the market. Its annual sales could reach $6 billion a year by 2006, according to New York investment research boutique Sanford C. Bernstein & Co.

Crestor will be going up against some well-established and highly effective drugs. The biggest threat comes from U.S. heavyweight Pfizer Inc.'s Lipitor, currently the world's best-selling drug, with expected 2002 sales of $7 billion. Merck & Co.'s Zocor is in second place, with $6.5 billion in sales. Still, Crestor looks like a comer. "In clinical studies comparing all statins at the starting dose of 10 milligrams, Crestor is far more effective than any other, including Lipitor," says Bernstein's Catherine J. Arnold.

However, dosage is likely the sticking point holding up Crestor's approval in the U.S. Baycol awoke the world to the dangers of cholesterol-lowering drugs. At the highest doses, statins can cause severe, and potentially fatal, muscle-related side effects. The FDA deems Lipitor and Zocor safe enough to be administered in doses of up to 80 milligrams. But some analysts believe it is unlikely Crestor will gain approval for doses beyond 20 milligrams. That unsettles investors, though their concerns may be overstated. Tests show that a 20-milligram hit of Crestor would still be more effective than any other drug on the market, with the exception of an 80-milligram dosage of Pfizer's Lipitor. And post-Baycol, doctors are extremely wary about prescribing statins in high doses. What's more, AstraZeneca is expected to try to undercut the competition on price.

AstraZeneca says it makes it a policy not to comment during the drug-approval process. But McKillop expects approval for Crestor by the end of the year, and is gearing up for a massive product offensive. The company, which boasts the third-largest U.S. sales force, has earmarked $600 million for marketing Crestor--three times what it spent launching Nexium, its successor to mega-hit Prilosec. Overseeing the effort is Adele Gulfo, the American chemist-turned-marketing-pro who was behind rival Lipitor's launch. Investors are hoping McKillop's bet pays off.

By Kerry Capell in London

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