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AstraZeneca (AZN) Signs $6.9B Cancer Deal with Daiichi Sankyo

Kinjel Shah

AstraZeneca plc. AZN announced that it has acquired joint development and commercialization rights to a promising cancer candidate from Daiichi Sankyo. The deal requires the British drug giant to pay as much as $6.9 billion to the Japan based drug maker.

Per the deal, the companies will develop and commercialize Daiichi Sankyo’s proprietary antibody-drug conjugate (ADC) trastuzumab deruxtecan, which they claim has the potential to redefine the standard of care in cancer treatment. This is because targeted cancer medicines like ADC’s deliver chemotherapy selectively to cancer cells and reduce systemic exposure unlike conventional chemotherapy medicines.

Trastuzumab deruxtecan is being developed in HER2-expressing cancers including five pivotal late-stage studies for HER2-expressing breast and gastric cancers and mid-stage studies for HER2-expressing advanced colorectal cancer and metastatic non-squamous HER2-overexpressing or HER2-mutated NSCLC. The first regulatory application for trastuzumab deruxtecan is expected to be filed in the second half of 2019 for advanced or refractory breast cancer.

The candidate enjoys FDA’s Breakthrough Therapy status for HER2-positive metastatic breast cancer in patients who have been previously treated with Roche’s RHHBY breast cancer medicines Herceptin (trastuzumab) and Perjeta (pertuzumab) and witnessed disease progression after trastuzumab emtansine.

For the deal, AstraZeneca will make an upfront payment of $1.35 billion while being entitled to make contingent payments, comprising regulatory and sales related milestone fees of up to $5.55 billion

Daiichi, however, retained exclusive rights to the drug in Japan. The companies will equally share development and commercialization costs. AstraZeneca informed that it will fund the transaction partly through a share issue of up to $3.5 billion. 

The deal further strengthens AstraZeneca’s oncology pipeline. AstraZeneca is aggressively working on strengthening its oncology product portfolio and has several candidates in its pipeline. Oncology sales now comprise around 29% of total product sales for AstraZeneca and rose 50% in 2018. Key new and successful cancer drugs in its pipeline are Imfinzi, Lynparza and Tagrisso.

AstraZeneca’s shares were down 5% in pre-market trading on Friday probably as investors found the deal costly. Nonetheless, AstraZeneca’s stock has rallied 13.1% this year so far, outperforming the industry’s rise of 4.4%.

 

AstraZeneca currently carries a Zacks Rank #3 (Hold). Some better-ranked large cap drug stocks are Johnson & Johnson JNJ and Bayer BAYRY. Both the companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

J&J’s shares have risen 7.6% this year so far, a decent recovery from the decline last year. Its earnings estimates for 2019 have gone up 0.1% in the past 30 days. Though Bayer’s shares have declined 9.8% this year, its earnings estimates have increased 2.1% for 2019 over the past 60 days.

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AstraZeneca PLC (AZN) : Free Stock Analysis Report
 
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