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Novartis ditches Novo Nordisk diabetes drug

Denmark's Novo Nordisk said on Monday Swiss drug giant Novartis AG had ditched a project to commercialise its new dual-acting diabetes drug, casting a shadow over both companies' pipelines.

The news, which came less than a week after GlaxoSmithKline Plc stopped development of a similar drug because of adverse side effects, sent Novo Nordisk shares down more than four per cent.

Shares in Novartis fell 1.8 per cent as investors fretted over its line-up of new medicines ahead of a key R&D day which the Basle-based group is due to host in New York on Tuesday.

Novo Nordisk said the move would not affect its 2001 financial results and the company was sticking with the product, known as NN622.

"Our development programme continues unaffected by Novartis' decision. In terms of commercialisation of the product in North America we will now be considering various alternatives," chief executive Lars Rebien Sorensen said in a statement.

"Results from our Phase II studies confirmed that the profile of NN622 meets the therapeutic objectives we had set."

NN622 was licensed by Novo Nordisk from Indian drug maker Dr Reddy Labs and Novo Nordisk said it expected to start clinical final Phase III studies later this year.

NOVARTIS 'CONCENTRATING ON PORTFOLIO'

A spokesman for Novartis declined to say what triggered the firm's decision to abandon the product. "The only thing I can say is that we have decided to concentrate on our remaining portfolio in diabetes," he said.

This includes the Starlix diabetes drug which has got off to a slower-than-expected start in the key United States marketplace.

Novartis also has two other diabetes products in development, including one which also originated with Dr Reddy.

Some analysts speculated that NN622 may have run into similar side effect problems as GlaxoSmithKline's experimental drug, GI262570, which was abandoned following problems of swelling experienced by some patients.

But David Beadle of UBS Warburg in London said it could have been a purely commercial decision by Novartis.

"It may well be Novartis have decided it is more economical to go with their own products," he said.

Investors have had high hopes for Novo Nordisk's product, viewed as a key potential growth driver for the world leader in diabetes care products.

"If the drug does not come through it would be a loss of maybe five per cent on operating profit for Novo Nordisk in 2005," said Beadle added. "For Novartis it is a marginal difference -- but it highlights pipeline issues."

Both the GSK and Novo Nordisk drugs are dual-acting insulin sensitisers, which lower both glucose and lipid levels in the blood by increasing the body's sensitivity to insulin.

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