IPSEY Ipsen SA (PK)

Roche Holding AG's (RHHBY) hopes to bring a potential blockbuster diabetes drug to market have dropped further after the Swiss pharma giant released detailed late-stage trial figures, showing the medicine's side effects could reduce chances for regulatory approval, analysts said Monday.

The potential launch of the drug, which could net more than 2 billion Swiss francs, or $1.84 billion, in peak sales according to Roche estimates, fanned hopes the Swiss pharma giant would be able to substantially broaden its cancer biased product portfolio, thus providing it with a fresh growth pillar.

But chances for an early launch were already dented earlier this month, when Roche said safety concerns prompted the company to amend its late stage trials to closer monitor the side effects of taspoglutide, which included skin reactions and vomiting.

While the mid-June move meant that Roche may wait up to 18 months longer than planned to file the drug for approval, the detailed set of data that was presented during the weekend at the American Diabetes Association raised concerns the drug won't make it to the market at all.

Although some analysts said the fresh data was convincing, "the full data presentation suggest that taspoglutide's side-effect profile may be worse," said Annie Cheng, pharma analyst at brokerage Bryan, Garnier & Co. Due to this data, "we are lowering our estimated success probability for taspoglutide to 10% from 60%," she said.

Morgan Stanley was equally bearish. "We rate the possibility that Roche hands the drug back to Ipsen at around 50%," adding that Roche Chief Executive Severin Schwan may be reluctant to add more research funds into the drug, which Roche co-produces with French drug firm Ipsen (IPN.FR). As a result, the bank believes, Roche could start to cut costs in the U.S.

Roche couldn't be immediately reached for comment.

Meanwhile, Morgan Stanley also raised concerns about Roche's other non-cancer research pipeline. "Roche's sub-optimal development for taspoglutide raises questions about the integrity of the development programs for their other large phase III programs," the bank said, singling out diabetes drug aleglitazar and cholesterol treatment dalceptrapib, two drugs that could also reach blockbuster status if they are approved.

Roche has repeatedly touted its strong medical pipeline, saying it owns about 10 drugs in late and early state research that could generate more than CHF1 billion in annual sales. Many of the drugs treat diseases outside the company's core cancer field, thus helping reduce the firm's dependence on cancer treatments. Roche's best-selling medicines include cancer drugs Avastin, MabThera and Herceptin, which together generated more than CHF17 billion in annual sales, more than 30% of the company's total sales in 2009.

-By Goran Mijuk, Dow Jones Newswires, +41 43 443; goran.mijuk@dowjones.com

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