Astrazeneca plc, faced with what CEO Pascal Soriot recently called "probably the largest patent expiry in the industry as a proportion of the total company," has agreed to pay Daiichi Sankyo Co. Ltd. up to $6.9 billion to jointly develop and commercialize an antibody-drug conjugate (ADC) for the potential treatment of multiple HER2-expressing cancers. The deal for trastuzumab deruxtecan (DS-8201), which could have big benefits for both companies, includes $1.35 billion up front for Daiichi Sankyo. It could also yield a further $5.55 billion in milestone payments to the Tokyo-based big pharma.
A first regulatory submission for the ADC, currently in phase III, is scheduled for the second half of 2019 in advanced or refractory breast cancer.
Daiichi Sankyo shares (TOKYO:4568) climbed 15.9 percent to ¥5,100 (US$46.02) on the news late last week. Astrazeneca, which is funding the deal via a $3.5 billion follow-on offering, saw its shares (NYSE:AZN) fall 5.9 percent to $40.43 on Friday.
If successful, the ADC could offer certain breast cancer patients an alternative to Roche Holding AG's blockbuster ADC, Kadcyla (trastuzumab emtansine). It could also find applications in gastric, non-small-cell lung and colorectal cancers should trials in those indications pan out. (See BioWorld, Oct. 10, 2018.)
Soriot said Friday that Astrazeneca is looking to "maximize the value and utility" of the drug, which he said could be "transformative" not only as a taxane-free treatment of HER2-positive cancers, but also as an avenue to treating HER2-low cancers, which represent a significant segment of breast cancers. The asset also holds the potential to provide a long-term financial benefit to the Cambridge, U.K.-based company, he said, noting an expectation that it will provide growth not only in the near term, "but importantly, strong growth over a long period of time until 2030 and beyond."
Astrazeneca and Daiichi will share costs of trastuzumab deruxtecan's development equally while jointly holding responsibility for its development and commercialization, except in Japan where Daiichi Sankyo will retain exclusive rights.
Under the terms of the deal, half the $1.35 billion up-front payment was due upon execution, with the remainder payable a year later. The up to $5.55 billion in contingent payments that could fill out the rest of the deal's value include $3.8 billion for successful achievement of future regulatory and other milestones, as well as $1.75 billion for sales-related milestones.
The up-front payment and near-term milestones will be funded from the proceeds of a new $3.5 billion equity placement, of which more than half will be used to fund this transaction and the ongoing collaboration, Astrazeneca said.
"We see the rationale for boosting the pipeline, but terms seem onerous," Jefferies analyst Peter Welford wrote, adding that execution will be key to justifying the deal's terms. "The deal structure partly mitigates the financial risk, in our view, but $1.35 billion up front plus significant future milestones likely necessitates blockbuster peak sales to deliver a return, albeit exclusivity is expected into [the] 2030s," he wrote.
Indeed, Astrazeneca, like its peers, relies on new medicines to lift its revenues. Following a 5 percent sales decline in 2017, the company lifted itself to recovery in 2018 on the back of new medicines and emerging markets. But challenges still remain, especially in Europe, where the company saw regional sales decline by 6 percent in 2018 due to competition from generic versions of the statin Crestor (rosuvastatin calcium), and the rest of the world, where sales declined by 8 percent for the company in 2018. Further challenges lie ahead, as patent expirations on other medicines approach.
In remarks, translated from Japanese to English during a conference call regarding the deal, George Nakayama, Daiichi Sankyo's CEO, said the agreement touched on three significant areas of strategic value for his company. "First and foremost, we will accelerate DS-8201 development and the commercialization to reach more patients earlier," he said, the concrete evidence of which will come in the form of an FDA biologics license application submission to the FDA seeking approval to market DS-8201 for the treatment of HER2-positive metastatic breast cancer post-Kadcyla. The application is now expected to be submitted in the first half of 2019 vs. 2020, as originally planned, he said.
Less directly, the agreement will help Daiichi achieve two other goals, accelerating the establishment of its global oncology infrastructure and making it possible to expand the resources it devotes to other programs, including six additional ADCs the company has in development. "We had intensively invested into 8201 as a policy. But now having a partner to other ADC programs, we will be able to allocate our expenses and human resources so as to accelerate their development and increase the pipeline value," Nakayama said.
The deal's execution is timed just as Nakayama closes in on the final months of his term as CEO, with plans to transition the mantle to the company's president, Sunao Manabe, in June. But, with its ongoing focus on oncology, it's reflective of a strategic through-line first envisioned in 2016, when Daiichi Sankyo shifted its focus entirely to oncology from an earlier hybrid strategy that included a generic business with Ranbaxy Laboratories Ltd. "Now [the] new direction has been visualized in a concrete manner," Nakayama said, "and I think that it is therefore good timing for me to switch to my successor."
Much to gain, much to test
ADCs deliver cytotoxic chemotherapy to cancer cells through a linker attached to a monoclonal antibody that binds to a specific target on cancer cells. In the case of DS-8201, an anti-HER2 antibody is linked with a topoisomerase inhibitor, which could make the drug a potentially more potent ADC than Kadcyla, which carries a tubulin inhibitor as its payload. Accordingly, the FDA granted DS-8201 a fast track designation for the treatment of HER2-positive unresectable and metastatic breast cancer in patients who have progressed after prior treatment with HER2-targeted therapies, including Kadcyla.
In all, Daiichi Sankyo reported five pivotal trials of the ADC underway in HER2-expressing breast and gastric cancers. The candidate is also in phase II development for HER2-expressing advanced colorectal cancer and metastatic nonsquamous HER2-overexpressing or HER2-mutated NSCLC, and phase I development in combination with Opdivo (nivolumab, Bristol-Myers Squibb Co.) for HER2-expressing metastatic breast and bladder cancers.
Furthermore, combination studies of DS-8201 with partners other than Astrazeneca are underway and will plunge ahead, Daiichi said. In September, it entered a clinical collaboration agreement with MSD, a subsidiary of Merck & Co. Inc., to evaluate the combination of DS-8201 and Keytruda (pembrolizumab) in HER2-expressing or metastatic breast cancer and HER2-expressing or HER2 mutant NSCLC. And later, in October, a deal with Merck KGaA and Pfizer Inc. was inked to test DS-8201 with the checkpoint inhibitor avelumab and/or an investigational Merck KGaA DNA damage response inhibitor, in patients with HER2-expressing or mutated solid tumors.