AstraZeneca To Pay Up To $6B For Daiichi Cancer Drug Deal

AstraZeneca (AZN) has entered into a $6 billion global partnership with Daiichi Sankyo for the development and commercialisation of a potential new treatment for lung and breast cancer.

The two companies will collaborate to develop DS-1062, Daiichi Sankyo’s proprietary trophoblast cell-surface antigen 2 (TROP2)-directed antibody drug conjugate (ADC). DS-1062 is currently in development for the treatment of multiple tumours that commonly express the cell-surface glycoprotein TROP2.

As part of the collaboration agreement, AstraZeneca will pay Daiichi Sankyo an upfront payment of $1 billion in staged payments. The drugmaker will make additional payments of up to $1 billion conditional upon successful achievement of regulatory approvals and up to $4 billion for sales-related milestones.

“We see significant potential in this antibody drug conjugate in lung as well as in breast and other cancers that commonly express TROP2,” AstraZeneca CEO Pascal Soriot said. “We are delighted to enter this new collaboration with Daiichi Sankyo and to build on the successful launch of Enhertuto further expand our pipeline and leadership in Oncology.”

Soriot said that the drugmaker now has 6 potential oncology blockbusters with more to come in early and late pipelines.

The companies will jointly develop and commercialise DS-1062 worldwide, except in Japan where Daiichi Sankyo will maintain exclusive rights. AstraZeneca and Daiichi Sankyo will share equally development and commercialisation expenses as well as profits relating to DS-1062 worldwide, except for Japan where Daiichi Sankyo will be responsible for the costs and will pay AstraZeneca mid single-digit royalties.

Daiichi Sankyo will record sales in the US, certain countries in Europe and certain other countries where Daiichi Sankyo has affiliates. Profits shared with AstraZeneca from those countries will be recorded as collaboration revenue.

AstraZeneca shares have jumped 48% since mid-March as the drugmaker joined the list of companies engaged in the development of a potential coronavirus vaccine. Despite the recent rally, the $61.67 average analyst price target still puts the upside potential at 11% in the coming 12 months. (See AstraZeneca stock analysis on TipRanks)

Five-star analyst Steve Scala at Cowen & Co. last month raised the drugmaker’s price target to $60 from $55 and maintained a Buy rating to reflect the potential to compound annual sales at 10% and 18% through 2025.

Overall, the stock scores a Strong Buy consensus from the analyst community based on 4 unanimous Buy ratings.

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