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AstraZeneca and Eli Lilly Collaborate for Alzheimer's Drug

AstraZeneca (AZN) announced that it has entered into an agreement with Eli Lilly and Company (LLY) for the development and commercialization of an oral beta secretase cleaving enzyme inhibitor, AZD3293, for Alzheimer’s disease.

Terms of the Deal

As per the terms of the deal, Eli Lilly will make milestone payments of up to $500 million to AstraZeneca on the achievement of development and regulatory targets. AstraZeneca expects to record the first milestone payment of about $50 million in the first half of 2015. Both companies will share development and commercialization costs and net revenues equally.

Eli Lilly, which will lead the development path, will work alongside researchers from AstraZeneca. AstraZeneca will undertake manufacturing responsibilities. The companies are planning to initiate a phase II/III trial evaluating the use of AZD3293 in patients with early Alzheimer’s disease.

The deal is not expected to have any impact on AstraZeneca’s 2014 core earnings, which are expected to decrease in the low double digits.

Our Take

We are pleased with AstraZeneca’s effort to develop its neurodegenerative disease pipeline. The Alzheimer’s disease market represents huge commercial potential and a successfully developed product could generate billions of dollars in sales. As per data provided by the Alzheimer's Association, approximately 44 million people suffer from dementia worldwide. Alzheimer’s disease accounts for 60% to 80% (26.4 to 35.2 million) of dementia cases.

However, we note that the successful development of therapies for the treatment of Alzheimer’s disease is challenging and several companies including Eli Lilly have failed in developing treatments for the same.

AstraZeneca carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Gilead Sciences Inc. (GILD) and Allergan (AGN). Both Gilead and Allergan are Zacks Rank #1 (Strong Buy) stocks.

Read the Full Research Report on AZN
Read the Full Research Report on LLY
Read the Full Research Report on AGN
Read the Full Research Report on GILD


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