Analysts have been weighing up the effect on AstraZeneca of yet another late-stage pipeline failure after US partner AtheroGenics reported disappointing data on the heart disease drug AGI-1067.

As we reported yesterday, AtheroGenics presented data from the Phase III 6,100-patient ARISE study of AGI-1067 which showed that the compound failed to reduce deaths or complications when compared with placebo, its primary endpoint. However, the US firm, whose shares collapsed after the news was announced, remains upbeat about its potential in patients with diabetes.

Whether further development of AGI-1067 is of interest to AstraZeneca remains to be seen and analysts have been looking at the state of the company. Dresdner Kleinwort reiterated its ‘reduce’ rating on the stock and set a target price of £25.50, noting that as AGI-1067 is likely to become a niche drug at best, the Anglo-Swedish drugmaker “has a depleted late-stage product pipeline, with limited near-term catalysts.” Furthermore, the company’s present share price does not fully reflect the deteriorating risk/reward profile of the firm, Dresdner Kleinwort adds.

However, Navid Malik at Collins Stewart has upgraded the stock from a ‘sell’ to a ‘hold.’ He noted that when AstraZeneca linked up with AtheroGenics for AGI-1067 in December 2005, in a $1 billion deal (based on fees and milestones), with $50 million in an upfront payment and a stepped-up royalty stream (approaching 20%), it “looked punchy in term of the headline numbers, but the low upfront payment signalled the companies’ view that this was an option value high-risk investment.”

Mr Malik notes that AstraZeneca is guiding towards a three-year average top-line growth rate of 6%-8%, excluding impact of generic competition to blood pressure drug Toprol XL (metoprolol), which is in line with the growth of the global drugs market. As a result of its previously-announced cost-cutting programme, earnings per share growth is likely to be approaching 10% per year over three years, which is still slower than several peers, and in the short-term, patent challenges to three of the firm’s most successful products – Nexium (esomeprazole) for gastrointestinal disease, schizophrenia drug Seroquel (quetiapine) and asthma drug Symbicort (budesonide and formoterol) – will continue to add to top-line risk going forward.

In the past three years, AstraZeneca has seen four key Phase III drugs, which could have generated US$10 billion in sales, fail in late-stage development, Mr Malik noted and “given the risk profile going forward with a lower potential rate of product failure,” the rating has been upgraded. The Collins Stewart analyst concluded by noting that “whilst we continue to expect to see late-stage pipeline failures,” the next significant risky project is the cancer drug Zactima (vandetanib), and clinical trial data is not expected before the first quarter of 2008.