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AstraZeneca: AstraZeneca and Daiichi Sankyo enter collaboration for novel HER2-targeting antibody-drug conjugate

This announcement contains inside information The securities proposed
to be offered pursuant to the equity placing referred to herein will
not be and have not been registered under the US Securities Act of
1933, as amended, and may not be offered or sold in the United States
absent registration or an applicable exemption from registration

Companies to accelerate and expand development of trastuzumab
deruxtecan across breast and other cancers, with the potential to
redefine standard of care

Funding via an equity placement of approximately $3.5bn

Guidance for 2019 Core Earnings Per Share remains unchanged; growing
accretion from 2020 to a significant contribution in 2023

AstraZeneca has entered into a global development and
commercialisation collaboration agreement with Daiichi Sankyo
Company, Limited (Daiichi Sankyo) for trastuzumab deruxtecan
(DS-8201), a proprietary antibody-drug conjugate (ADC) and potential
new targeted medicine for cancer treatment.

The collaboration is aligned with AstraZeneca's science-led strategy
in Oncology, which is based on four key scientific platforms: tumour
drivers & resistance, DNA damage response, Immuno-Oncology and ADCs.

Trastuzumab deruxtecan is currently in development for the treatment
of multiple HER2-expressing cancers, including breast and gastric
cancer, and in patients with HER2-low expression. In 2017,
trastuzumab deruxtecan was granted Breakthrough Therapy Designation
by the US FDA for the treatment of patients with HER2-positive,
locally-advanced or metastatic breast cancer who have been treated
with trastuzumab and pertuzumab and have disease progression after
trastuzumab emtansine.

A first regulatory submission is scheduled for the second half of 2019
for patients in the advanced or refractory breast cancer setting.
Additional development for the treatment of breast, non-small cell
lung cancer (NSCLC), gastric and colorectal cancers is ongoing.

The companies will jointly develop and commercialise trastuzumab
deruxtecan worldwide, except in Japan where Daiichi Sankyo will
maintain exclusive rights. Daiichi Sankyo will be solely responsible
for manufacturing and supply.

Pascal Soriot, Chief Executive Officer, said: "We believe that
trastuzumab deruxtecan could become a transformative new medicine for
the treatment of HER2-positive breast and gastric cancers. In
addition, it has the potential to redefine breast cancer treatment as
the first therapy for HER2-low expressing tumours. It also has the
potential to treat other HER2-mutated or HER2-overexpressing cancers,
including lung and colorectal cancers. We are proud to be working
with Daiichi Sankyo, a long-term collaborator of AstraZeneca in other
disease areas."

George Nakayama, Representative Director, Chairman and Chief Executive
Officer of Daiichi Sankyo, said: "Trastuzumab deruxtecan is the
flagship asset in our oncology pipeline created by our relentless
pursuit of science and technology, the most important strengths of
our company. Through the strategic collaboration with AstraZeneca, a
company with a wealth of global experience and expertise in oncology,
we will combine our respective skill sets to maximise the value of
trastuzumab deruxtecan and accelerate the establishment of our global
oncology business. By aiming to provide new treatment options across
a wide range of cancers as soon as possible, we will maximise our
contribution to patients with cancer and their families around the

Using Daiichi Sankyo's DXd proprietary ADC technology, trastuzumab
deruxtecan has been designed to deliver chemotherapy selectively to
cancer cells and reduce systemic exposure, in contrast to
conventional chemotherapy delivery. Data from the ongoing
first-time-in-human trial shows strong activity in a number of tumour
types. In particular, the strength of the overall response rate and
durability of response in patients previously treated with
trastuzumab emtansine for HER2-positive metastatic breast cancer
formed the basis for the Breakthrough Therapy Designation.1

Financial considerations

Under the terms of the agreement, AstraZeneca will pay Daiichi Sankyo
an upfront payment of $1.35bn, half of which is due upon execution,
with the remainder payable 12 months later.

Contingent payments of up to $5.55bn include $3.8bn for potential
successful achievement of future regulatory and other milestones, as
well as $1.75bn for sales-related milestones.

Overall, the transaction will be accounted for as an intangible asset
acquisition, recognised initially at the present value of
non-contingent consideration, with future milestones capitalised into
the intangible asset as they are recognised. AstraZeneca and Daiichi
Sankyo will share equally development and commercialisation costs as
well as profits from trastuzumab deruxtecan worldwide, except for

Daiichi Sankyo will record sales in the US, certain countries in
Europe and certain other markets where Daiichi Sankyo has affiliates.
Further to the financial reporting announcement below, profits shared
with AstraZeneca will be accounted for as Collaboration Revenue by
AstraZeneca (see further below, `Financial reporting presentation').

AstraZeneca is expected to record Product Sales in all other markets
worldwide for which profits shared with Daiichi Sankyo will be
accounted for as cost of goods sold.

The transaction is expected to be neutral to core earnings in 2019,
with growing Core EPS accretion from 2020 and making a significant
contribution in 2023. There are no closing conditions to the
transaction. The collaboration agreement will become effective on 29
March 2019. The transaction and funding arrangements do not impact
the Company's financial guidance for 2019 as published on 14 February

The upfront payment and near-term milestones under the transaction
will be funded from the proceeds of a new equity placement of
approximately $3.5bn, of which more than half will be used to fund
this transaction and the ongoing collaboration. A separate
announcement will be issued by the Company today on the equity

For the purposes of the UK Listing Authority's Listing Rule LR 10.4.1
R (Notification of class 2 transactions), the value of gross assets
acquired with the transaction is estimated to be $1.5bn and, in view
of the development phase of the medicine, a pre-tax loss of $38m was
attributable to trastuzumab deruxtecan during the year to 31 March

About Trastuzumab deruxtecan

Trastuzumab deruxtecan (DS-8201; [fam-] trastuzumab deruxtecan in US
only) is the lead potential new medicine in the ADC franchise of the
Daiichi Sankyo Cancer Enterprise. ADCs are targeted cancer medicines
that deliver cytotoxic agents to cancer cells via a linker attached
to a monoclonal antibody that binds to a specific target expressed on
cancer cells.

A broad and comprehensive development programme with trastuzumab
deruxtecan is underway in North America, Europe and Asia, including
five pivotal trials in HER2-expressing breast and gastric cancers.
Trastuzumab deruxtecan is also in Phase II development for
HER2-expressing advanced colorectal cancer and metastatic
non-squamous HER2-overexpressing or HER2-mutated NSCLC, and Phase I
development in combination with nivolumab for HER2-expressing
metastatic breast and bladder cancers.

Trastuzumab deruxtecan was granted Breakthrough Therapy Designation in
2017 by the US FDA for the treatment of patients with HER2-positive,
locally-advanced or metastatic breast cancer who have been treated
with trastuzumab and pertuzumab and have disease progression after
trastuzumab emtansine. Fast Track Designation was also granted in the
US for the treatment of HER2-positive unresectable and/or metastatic
breast cancer in patients who have progressed after prior treatment
with HER2-targeted medicines, including trastuzumab emtansine.
Trastuzumab deruxtecan has received Sakigake designation for the
treatment of HER2-positive advanced gastric or gastroesophageal
junction cancer by the Japan Ministry of Health, Labour and Welfare.

Trastuzumab deruxtecan is a potential new medicine that has not been
approved for any indication in any country. Safety and efficacy have
not been established.

Financial reporting presentation

As a result of this announcement, AstraZeneca also updates the
presentation of Total Revenue within its Statement of Comprehensive
Income. This is effective from 1 January 2019 and will be reflected
in the Company's Q1 2019 financial results that are intended for
publication on 26 April 2019.

In 2015, the Company announced a change to the presentation of Total
Revenue within its Statement of Comprehensive Income to include
Externalisation Revenue. Today's announcement recognises the growing
importance of collaborations to AstraZeneca and will result in income
arising from those collaborations being recognised within Total
Revenues. The associated costs of collaborations will be recognised
in the appropriate expense lines in the Statement of Comprehensive

Historically, Externalisation Revenue only included income arising
from transactions involving AstraZeneca's medicines. Such income
included upfronts, milestones receipts and royalties, as well as
other income from collaborations. The updated category of
Collaboration Revenue will also include income of a similar nature
arising from transactions where AstraZeneca has acquired an interest
in a medicine and entered into an active collaboration with the

No prior year restatement of financial results will be required as a
result of this change. The change in accounting presentation does not
impact the Company's revenue guidance for 2019.

About AstraZeneca

AstraZeneca is a global, science-led biopharmaceutical company that
focuses on the discovery, development and commercialisation of
prescription medicines, primarily for the treatment of diseases in
three therapy areas - Oncology, Cardiovascular, Renal & Metabolism
and Respiratory. AstraZeneca operates in over 100 countries and its
innovative medicines are used by millions of patients worldwide. For
more information, please visit
( and follow us on Twitter @AstraZeneca

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