Business / Corporate

Astra to pay Daiichi up to $6 billion for new cancer drug

Bloomberg

AstraZeneca PLC has agreed to pay as much as $6 billion (¥630 billion) to buy into Daiichi Sankyo Co.’s promising medicine for lung and breast cancer, the drugmakers’ second potential blockbuster oncology deal in two years. The news sent Daiichi shares jumping the most since March.

The U.K. drugmaker will pay Daiichi $1 billion upfront to jointly develop and bring to market a cancer therapy in early clinical tests called DS-1062, the companies said Monday. As much as $5 billion in additional payments could follow, subject to regulatory and sales milestones.

AstraZeneca is forging ahead to become a global oncology powerhouse, even as it works on a vaccine for the coronavirus pandemic. Last year, the company committed to pay Daiichi as much as $6.9 billion for another cancer medicine, which marked its biggest deal in more than a decade. For the Japanese company, the deal is the latest in what has turned into a transformative partnership. Besides the cancer deals, Daiichi is in talks to make Astra’s COVID-19 vaccine in Japan.

The Daiichi treatment, an antibody-drug conjugate that targets tumors that express a protein known as TROP2, is "extraordinary,” Jose Baselga, Astra’s head of cancer research, said in an interview. He described it as an "agent that could transform and will transform the therapy landscape.”

Daiichi shares rose as much as 9.8 percent in early Tokyo trading Tuesday, the biggest intraday jump since March 19. AstraZeneca shares added 1.4 percent in London on Monday.

Since the first Astra deal last March, Daiichi’s stock has more than doubled and it’s now the second-biggest pharmaceutical company in Japan by market capitalization, edging past Takeda Pharmaceutical Co.

Daiichi’s latest deal, along with the previous collaboration, "highlights management’s willingness to form alliances to raise overall value, and seems likely to enhance the image of management’s decisiveness,” Citigroup analyst Hidemaru Yamaguchi wrote in a note to investors Monday.

The Japanese drugmaker pivoted to oncology treatments only a decade ago, after being mired for years in litigation over data fabrication at its Indian subsidiary. A key turning point came when the Tokyo-based company hired Antoine Yver, who ran the oncology unit at AstraZeneca, in 2016, paving the way for the British giant to take notice of Daiichi’s groundbreaking work on cancer.

"We had a number of potential collaborators who met with us,” about the therapy, Yver said in an interview. Astra was picked because "of their experience, because of their strength in oncology, because of our past collaboration.”

AstraZeneca will pay cash for the latest deal in three stages: $350 million this month when the deal closes, $325 million after 12 months and again a year later. Daiichi will manufacture and supply the cancer drug, and keep exclusive rights to the medicine in Japan.

Data from early trials points to strong activity in lung cancer, but also high toxicity with two deaths, said Sam Fazeli, an analyst at Bloomberg Intelligence.

Baselga said the drugmakers are working to mitigate the toxicity and the patients had received the highest doses of the drug, which are unlikely to be those retained for broad use.

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