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What's going on?
AstraZeneca, one of the worlds largest pharmaceutical companies, reported on Thursday that one of its highly anticipated drug trials was unsuccessful and its stock fell by 16%, its biggest ever drop in a single day!
What does this mean?
A few years ago, AstraZeneca announced that it was testing a new kind of immunotherapy drug treatment for lung cancer. Its CEO expected the therapy to transform the company; however, the first results from the trial came in on Thursday, and they found that the new medicine wasnt any more effective than chemotherapy in fighting early-stage lung cancer.
Needless to say, its not good news for AstraZeneca. It staked its financial future on high-risk and high-reward prescription drugs like the one from the lung cancer trial, and with two failed high-stakes drug trials under its belt in the past year, it seems unlikely that AstraZeneca will be able to make good on its ambitious promises to shareholders (see below).
Why should I care?
The bigger picture: Going at it alone has been a challenge for AstraZeneca.
When AstraZeneca rebuffed a $120 billion acquisition offer from Pfizer in 2014, the companys management told shareholders that it aimed to nearly double its sales by 2023, primarily from selling drugs that treat cancer. Without selling the (effectively) failed lung cancer drug, its difficult to see how AstraZeneca will be able to achieve that goal.
For markets: Shares in AstraZenecas rivals also reacted to the news.
Bristol-Meyers Squibb, which is also trialing a lung cancer drug thats similar to AstraZenecas, fell by about 3% on Thursday as investors feared its drug might fail too. Meanwhile, Merck, which is currently the only manufacturer of an immunotherapy treatment for previously untreated lung cancer, saw its stock rise by about 3% as a potential competitor fell away.
Originally posted as part of the Finimize daily email.
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