£19m blow as Celltech drops drug

BRITAIN'S biggest biotech group Celltech marred a 76% rise in interim pre-tax profits today by abandoning another of its promising portfolio of drugs and taking an £18.8m exceptional charges hit.

The axed drug is Humicade, a treatment for Crohn's disease, a chronic inflammation of the intestines. The exceptionals reduced earnings of £20.9m to £2.1m.

Chief executive Goran Ando today admitted the group faced a tough three years but he still plans more acquisitions and organic growth of its coughs and colds business which is doing well in the US.

The one-off charge follows the appointment of Ando, from Sweden, last April in place of Peter Fellner, who became chairman.

Ando immediately began to streamline the pharmaceuticals business that had a turnover of £111.4m in the six months ending June. The US manufacturing facility in Santa Ana, California, was closed and its research and development programme was also subject to a series of economies.

Following the recent takeover of Oxford GlycoSciences, whose integration will be completed by the end of the year, the group has £140m in the bank to make further acquisitions. Ando plans to go for 'young and growing companies with a couple of drugs on the market'.

Humicade failed to meet the group's primary targets set in trials. Celltech has already suffered the humiliation of its partner, US giant Merck, halting clinical trials for its treatment for asthma and chronic obstructive pulmonary disease. During trials a patient developed colitis.

Celltech is left with a follow-up to Humicade, CDP 870, which it is developing with Pharmacia, part of Pfizer following a takeover last April.

CDP 870 could still end up as a treatment for Crohn's disease, though its potential lies more securely in the treatment of rheumatoid arthritis. This could come to fruition in 2004. It could generate sales of $1bn in rheumatoid arthritis.

However, US owned Johnson & Johnson has already produced a treatment for Crohn's disease which is on sale and generates sales of $600m a year. Ando believes CDP 870 can still compete because it has special properties that the J&J drug does not possess. If it is successful CDP 870 could produce sales of $500m.

Ando still has ambitions for the group to return to the FTSE 100 although it is 18 months since it was ejected. Today the shares fell 15p to 353p.

Now under development

CELLTECH is currently developing up to a dozen new drugs including these three.

Zavesca: This is used to treat Gaucher disease and is most prevalent among Ashkenazi Jews, many of whom live in the United States. The drug recently received approval from the US Food and Drug Administration, in addition to being approved in Europe and Israel. Gaucher disease causes painful inflammation of the spleen.

Mylotarg: This is used to treat leukaemia. However, this drug has not been selling particularly well.

CDP 870: Expected to be launched in 2005 to treat patients with rheumatoid arthritis and Crohn's Disease.