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Message - May 3, 2001
Roche hit by possible Pegasys drug delay
By Michael Shields

ZURICH, April 27 (Reuters) - Roche Holding AG's patchy reputation in bringing new drugs to market was dealt a fresh blow on Friday after U.S. regulators sought more information on clinical trials for a key new drug.

The company said it still hoped to launch hepatitis C medicine Pegasys on schedule, but could not rule out a delay.The stock market reacted poorly to news of a potential stumble in rolling out the Swiss drug and diagnostics group's most important new medicine this year.

Traders said the news could add pressure on Roche to do a major acquisition or merger to bolster its weak product pipeline, but financial analysts argued it was too early to hit the panic button until the problem with Pegasys was clearer.

Roche certificates, which have been fallen as much as 30 percent this year amid slack sales at Roche's flagship drugs division, fell 4.4 percent to 11,750 Swiss francs before recovering somewhat to 12,045 in a generally weaker market.

"We hope that (a delay) is not going to happen. This depends on the quality of the questions. Our experts are looking into this now," a Roche spokesman said.

"I would not say there is an immediate delay to the whole thing. This cannot be completely ruled out, but there is not an immediate indication for that," he added. This depended in part on when talks with the U.S. Food and Drug Administration could take place. Roche had applied last May for U.S. marketing authorisation of Pegasys, a longer-lasting version of its interferon drug Roferon-A that was expected to be one of its key sales drivers at a time of listless pharmaceutical turnover growth.

It had expected to start selling the drug in the U.S. market in the fourth quarter of 2001. Analysts have estimated the drug could have annual sales of close to a billion francs by 2004.

Commerzbank said in a research note that it was downgrading Roche to "accumulate" from "buy" and cutting its price target to 14,000 francs from 15,500 given a development that it said could well result in a roughly six-month launch delay.

The Roche spokesman said an FDA review panel had raised questions about clinical trial data for Pegasys, which uses a molecule developed and produced by U.S.-based Shearwater Corp. "As is expected in these filings and reviews they are coming up with some additional questions on the clinical data. This is quite usual for such an application. We will provide additional information and the procedure goes on," he said.


The stock market buzzed with speculation Roche would strike a liberating blow from its current pipeline woes by making a big acquisition, perhaps of Germany's Schering AG. They cited Roche's $12 billion cash pile that company officials have said it will not hoard forever but eventually use to bolster its core businesses. "Now Roche is really under pressure finally to do something," one share trader said.

But Roche executives have also said they will not do a big deal just to spur sluggish drug sales, and analysts said the jury was still out on how bad the Pegasys problem was. "The problem is we don't know exactly which issues have been raised. We only know it is not a safety issue, which is good news," said Birgit Kulhoff at Lombard Odier. She said Roche told analysts it can respond to the issues by "summer," so the best-case scenario is still for a rollout late this year and the worst case is the second quarter of 2002. Denise Anderson at Bank Julius Baer said Roche must have known all along that some issues were still open or else it would have not have forecast a fourth-quarter launch for a drug expected to get FDA approval by May. She stuck to her forecast the drug would generate 900 million francs in sales by 2004.

It is the latest in a series of late-stage problems for Roche drugs. It halted developing a promising Alzheimer's drug in 1999 when some patients had liver problems during trials. In 1998 it had to pull heart drug Posicor and sharply restrict sales of Parkinson's drug Tasmar amid concerns about side effects. "If it's a company where everything is going along more or less OK, a well-oiled machine, something like this is frankly part of doing business," Anderson said. "If you have a company like Roche where this is a vital launch -- if this launch doesn't go well the company is totally dead -- then there is a lot of psychological impact." But she said the problem did not put more pressure on Roche to do a big deal unless the drug flops when it is launched. Kulhoff said the focus now was on data Roche is set to present in May on the efficacy of Pegasys in combination with ribovirin.

This is important because Schering-Plough Corp is already on the market with its monotherapy pegylated interferon and has already filed combination data. "With this delay Roche has a chance to get meaningful market share only if the combination data are good," she said.

©Copyright 2001 Reuters Limited. All rights reserved.

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