Abbott shares scorched by kidney drug failure

(Reuters) - Abbott Laboratories Inc said its partner, Reata Pharmaceuticals, was discontinuing a late-stage trial of their potential blockbuster treatment for chronic kidney disease and diabetes based on safety concerns raised by an independent safety committee.

The news for bardoxolone, which sent Abbott shares down 6 percent, represents a major setback just months before the planned January 1 spinoff of Abbott's branded prescription drugs into a separate publicly traded company called AbbVie. Without the high-profile drug, Wall Street concerns about AbbVie's dependence on Abbott's $8 billion-a-year rheumatoid arthritis drug, Humira, could intensify.

An independent data-monitoring committee found excess serious adverse events and mortality in patients taking the oral anti-inflammatory drug, Abbott said in a regulatory filing.

Regulators were notified of the decision, and study participants were being informed, the company said.

Thursday's stock selloff followed similar stock declines on Wednesday after Abbott reported disappointing third-quarter sales of Humira and disclosed that AbbVie's annual tax rate will be far higher than investors had expected, undermining AbbVie's future earnings.

"The bardoxolone blow-up could not come at a worse time," Jefferies & Co analyst Jeffrey Holford said in a research note. "Investors were already reeling from yesterday's update on the tax rate for AbbVie and now one of the more visible pipeline assets has disappeared just the next day."

But Holford reiterated his "buy" rating on Abbott, saying the drug would not have driven cash flow at AbbVie for the next few years, and that the setback should not impair the new drugmaker's future dividend or valuation.

J.P. Morgan analyst Michael Weinstein said bardoxolone and Abbott's experimental treatments for hepatitis C stand out as the two potential "mutilbillion-dollar pipeline opportunities" for AbbVie.

Bardoxolone had been expected to deliver revenue that could cushion Abbott if rival arthritis drugs cut in to Humira's growth, and also offset plunging sales of older Abbott drugs losing patent protection, Weinstein said.

"Bardoxolone (is) coming out of our model," Weinstein said, meaning he is no longer expecting any sales from the drug.

Cowen and Co had estimated bardoxolone could generate annual sales of more than $1 billion in the overseas territories where Abbott has rights to the drug, citing a potential market of 400,000 dialysis patients in Europe.

Reata in September 2010 granted Abbott exclusive rights to develop bardoxolone outside the United States, excluding certain Asian markets.

Reata's drugs are designed to activate Nrf2, a protein believed to be a principal regulator of cellular antioxidation and detoxification enzymes, while suppressing NFkB, a primary regulator of inflammatory genes.

Abbott shares were down 5.7 percent at $65.11 on the New York Stock Exchange in late morning, after falling 4.4 percent on Wednesday.

(Reporting by Ransdell Pierson in New York, Esha Dey in Bangalore; editing by Sreejiraj Eluvangal, Theodore d'Afflisio and Matthew Lewis)

Source: http://news.yahoo.com/abbott-reata-kidney-disease-drug-trial-stopped-134112840--finance.html

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