If at first you succeed, but then you don't, throw in the towel. One might be inclined to think that's what Astex Pharmaceuticals
Phase 1 clinical trials showed promise for the drug. However, the company's phase 2 study didn't achieve the desired outcomes. Rather than press forward with continued development of amuvatinib, Astex decided to pull the plug.
While the company's shares were hit fairly hard by the bad news, Astex appears to be poised to fail forward -- to ultimately succeed despite temporary failures. Here are three ways I think it will do so.
Squeezing a little more
Astex currently gains most of its revenue from sales of Dacogen. The drug is approved for treatment of myelodysplastic syndromes in the U.S. and 30 other countries. However, it is not yet approved in Europe or Japan.
Astex should be able to squeeze more revenue from Dacogen by gaining European approval. That approval appears to be forthcoming.
Janssen, a unit of Johnson & Johnson
Approval in Europe for Dacogen would easily move Astex past the stigma of failure from its discontinuation of amuvatinib.
The company hopes to benefit from another drug in its pipeline, AT13387. This drug is a small molecule inhibitor of Hsp90, sometimes referred to as the "Heat Shock" protein. AT13387 could potentially be used in treating several types of cancers.
Astex is completing a phase 1 study of the drug in treating patients with advanced refractory tumors. A phase 2 study in patients with refractory gastrointestinal stromal tumors has been initiated, as well as phase 1 and 2 trials for use of AT13387 in treating prostate cancer.
Of course, AT13387 could suffer the same fate as amuvatinib did. On the other hand, successful trials could lead to a new market for the company.
Astex smartly partners with multiple larger pharmaceutical organizations. Johnson & Johnson, through its Janssen unit, not only sells Dacogen outside of North America, but also bought a license to compounds that could come from Astex's Fibroblast Growth Factor Receptor inhibitor program.
Astex also works with GlaxoSmithKline
The net effect of these partnerships is to cushion the impact to Astex that can come from an isolated failure like that experienced with amuvatinib. These alliances also help the company gain financial benefits more quickly from its pipeline successes.
Astex should be positioned relatively well to move forward even with the amuvatinib stumble. Investors might consider taking advantage of the current stock decline in advance of a potential European approval of Dacogen.
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Fool contributor Keith Speights owns no shares in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.