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AstraZeneca Needs New Breast Cancer Drug to be Blockbuster

- By Barry Cohen

AstraZeneca (ZN) needs a blockbuster to justify its nearly $7 billion investment for a share of Japan-based Daiichi Sankyo's (TSE:4568) drug to treat a type of breast cancer. So far, the British pharma giant has reasons to be optimistic about its chances.


Following promising Phase 2 test results for the partners' drug trastuzumab deruxtecan, the company plans to file for regulatory approval, probably in the second half of the year in the U.S., it said in a May 8 release.

The HER2-targeting antibody drug conjugate (ADC) and potential new medicine was evaluated in patients with HER2-positive, unresectable and/or metastatic breast cancer previously treated with another drug combination.

Jose Baselga, executive vice president of research and development in oncology at AstraZeneca said he thinks the drug can potentially "redefine the treatment of patients with HER2-expressing cancers."

Of every five breast cancers, about one has a gene mutation that produces too much of the HER2 protein. HER2-positive breast cancers tend to be more aggressive than other types of breast cancer, according to the Mayo Clinic. Each year about 1.6 million new cases are diagnosed worldwide, and over 500,000 women will die of the disease, according to Roche (OTCPK:RHHBF), by far the world's biggest cancer drug company.

To buy into the Daiichi Sankyo drug, AstraZeneca had to go to the public market in March for the first time. It raised $3.5 billion in a public stock offering, which Bloomberg described as a "painful experience." The encouraging news on trastuzumab deruxtecan didn't do anything to boost investor optimism about AstraZeneca. In fact, just the opposite. The stock is down more than 12% since early March.

Still, analysts are enthusiastic about Astra's prospects. Of the five following the company, three have the shares as a Strong Buy, and one at a Buy and one at a Hold. The average target price for it is more than $46, nearly 25% higher than the $37.28 it trades at now.

The Phase 2 results of the Astra-Daiichi Sankyo drug may prove it's a good option for HER2 breast cancer patients who have had success after being treated with two Roche's drugs and who then move on to receive another cancer drug from Roche and one from Novartis (NVS).

Given the size of the unmet need, a number of other companies market or are developing drugs to great HER2. The Pfizer (PFE) drug Ibrance is one. Puma Biotechnology (PBYI) had high hopes for its treatment Nerlynx, but when sales of the drug disappointed in the first quarter, the stock was pummeled, dropping by a third on a single day. At just under $17, Puma now trades around 25% off its 52-week high.

Investors may want to keep an eye on companies developing new HER2 treatments. One of the novel therapies cited by leading breast cancer expert Sara A. Hurvitz, MD, at the 2019 Miami Breast Cancer Conference was margetuximab, according to an article in the ASCO POST. The drug's developer is MacroGenics (MGNX), which recently reported positive results from its Phase 3 study.

Disclosure: The author holds no positions in any of the stocks mentioned.

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This article first appeared on GuruFocus.