This week’s standout performers from the UK 100 come from opposite ends of the drug spectrum. A pharmaceutical giant benefited from early cancer drug trial news, its shares closing the week nearly 12% to the good. In stark contrast, a major producer of generic medicines gave up almost 13% after news of a likely delay to US approval for a copycat asthma inhaler.

AstraZeneca shares, already on the up earlier in the week, popped over 7% today on early results from a Phase III trial of Imfimzi its immuno-oncology treatment for unresectable non-small cell lung cancer being tested in patients who had failed to benefit from standard chemo/radio therapy and could not have surgery.

Encouraging interim analysis from the PACIFIC trial showed the drug had already met its primary endpoint, significantly reducing risk of disease worsening or death. This bodes well for the trial’s full results, increasing potential of full approval and use as both a mono and combination therapy, especially having already been given accelerated FDA approval for pre-treated patients with advanced bladder cancer.

Cancer drugs were worth $3.3bn for AZN last year but it currently lacks a blockbuster ($1bn per annum sales). With data from the trial not expected until the second half of the year, these early results could give AZN the head start it needs against peers like US Merck and Bristol Myers and Swiss Roche in being approved for earlier stage use of its immunotherapies. It also bodes well for results from the several other trials ongoing for the drug.

Investors in Pharma and Biotech are well aware of drug trial results making or breaking a company, and its shares. It’s a long journey from lab to approval, so gaining six months anywhere along the way is a big deal in terms of being a step closer to major success. Especially after years of major patent expires and generic competition reducing the numbers of blockbusters on the books.

At the other end of the spectrum this week was generic medicine manufacturer Hikma Pharmaceuticals which saw its shares give up 8% yesterday, and more today. This after it said it was unlikely to receive US approval for a generic asthma drug in 2017. A complete response letter from the FDA classed as ‘major’, related to its abbreviated new drug application for a generic version of GlaxoSmithKline’s Advair Diskus is a real blow.

Hikma (and partner Vectura) must now provide the FDA with more data, which takes another 10 months to respond to, meaning the hoped for launch data of H2 2017 is off the cards. So too then the expected 15%/$90m boost to its Generics franchise which accounts for 30% of group sales. As we said earlier, it’s a long journey and a slow approval process is just part of that.

AZN shares jumped as investors priced in potential for earlier drug approval and brought forward estimates for sales and cash-flow. HIK shares sold off for the exact opposite; delay to drug approval means delayed sales and cash flow. You don’t need to understand the science to know that early is good and delays are bad. The longer you have to wait for payback for all those years of clinical trials, the more you have to discount its net present value. And the first place that is reflected is the share price.

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Enjoy your weekend

Mike van Dulken, Head of Research, 12 May 2017