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April 24, 2015

AstraZeneca Inks $1.8B in Immuno-Oncology Deals as Q1 Profit Dips

  • AstraZeneca and its MedImmune biologics R&D arm today launched a pair of collaborations—valued at a combined roughly $1.8 billion—that will combine their Phase III immuno-oncology treatment candidate MEDI4736 with cancer-fighting candidates being developed by Celgene and Innate Pharma.

    With Celgene, AstraZeneca has agreed to develop and commercialize MEDI4736 across blood cancers that include non-Hodgkin’s lymphoma, myelodysplastic syndromes, and multiple myeloma. MEDI4736 will be assessed both as monotherapy and in combination with other AstraZeneca and Celgene potential and existing cancer medicines. Over time, the collaboration could expand to include other assets, the companies said.

    MEDI4736 is a programmed cell death ligand 1 (PD-L1) immune checkpoint inhibitor that is designed to fight cancer by blocking signals from PD-L1 that help tumors avoid detection by the immune system. MEDI4736 has been advanced into Phase III clinical development in non-small cell lung cancer and head and neck cancer.

    AstraZeneca and MedImmune have been busy this week lining up partners for further study of MEDI4736. Just yesterday, MedImmune joined Juno Therapeutics in launching a clinical trial collaboration of undisclosed value to assess the combination of MEDI4736 with one of Juno’s investigational CD19-directed chimeric antigen receptor (CAR) T cell candidates. An initial Phase Ib trial is set to launch later this year.

    Under their exclusive collaboration, Celgene agreed to pay AstraZeneca $450 million upfront, lead development efforts across all clinical trials within the collaboration, and shoulder all R&D costs through the end of 2016, after which its share of those costs will drop to 75%. Celgene also agreed to oversee global commercialization of approved treatments.

    AstraZeneca agreed to continue manufacturing and booking all sales of MEDI4736, as well as to pay royalties to Celgene on worldwide sales in haematological indications. The royalty rate will start at 70% and shrink to approximately half of the sales of MEDI4736 in haematological indications over four years.

    “Together with Celgene, we are designing a program for our anti-PD-L1 that will explore its full potential as a game-changing treatment that could activate the patients’ immune system to fight and change the course of blood cancers in this area of high unmet need,” Bahija Jallal, Ph.D., evp at MedImmune, said in a statement.

    Added Jacqualyn A. Fouse, Ph.D., president, global haematology and oncology for Celgene: “This collaboration advances Celgene’s already deep, diverse scientific platform to include checkpoint inhibitors, an area of significant promise in haematology.”

    Separately, AstraZeneca agreed to study the combination of MEDI4736 with Innate Pharma’s Phase II anti-NKG2A antibody IPH2201 under an up-to-$1.275 billion global collaboration aimed at co-developing and commercializing Innate’s potential first-in-class humanized IgG4 antibody. NKG2A is a checkpoint receptor that fights tumors by binding HLA class I histocompatibility antigen, alpha chain E (HLA-E), thus inhibiting the anti-cancer functions of cytotoxic Natural Killer (NK) and CD8 T lymphocytes.

    The companies said they agreed to an initial development plan that includes Phase II combination trials of IPH2201 and MEDI4736 in solid tumors; “multiple” Phase II trials by Innate to study IPH2201 both as monotherapy and in combination with currently-approved treatments across a range of cancers; and development of associated biomarkers.

    AstraZeneca agreed to pay Innate an initial $250 million for exclusive global rights to co-develop and commercialize IPH2201 with MEDI4736, as well as access to IPH2201 in monotherapy and other combinations in unspecified treatment areas. AstraZeneca also agreed to pay Innate $100 million before the launch of Phase III development, as well as up to $925 million in payments tied to regulatory and sales milestones. AstraZeneca will book all sales and will pay Innate double-digit royalties on net sales. Innate will hold rights to co-promote its treatment in Europe in return for a 50% profit share in the territory.

    “This agreement allows Innate Pharma to broaden and accelerate the development of anti-NKG2A while preserving our innovative development plan. It provides Innate Pharma with the capabilities and resources to transform the company towards late stage development and potential commercial stage with co-promotion rights,” Hervé Brailly, Innate’s CEO and co-founder, said in a statement.

    The collaborations with Celgene and Innate are expected to take effect later in the second quarter of this year, upon expiration or termination of waiting periods under antitrust laws.

    AstraZeneca said its Celgene and Innate collaborations would not change its 2015 financial guidance to investors. News of the collaborations was released the same day AstraZeneca announced a year-over-year decline in first-quarter profit—down 7%, or 3% at constant exchange rates—to $1.37 billion, on revenue of $6.057 billion, down 6%, but up 1% at constant exchange rates.

    The company has denied the contention of several analysts that in pursuing partnerships like the MEDI4736 collaborations, AstraZeneca was simply propping up its results to fill the revenue gap caused by slumping sales of blockbusters due to generics and disappointing sales of newer drugs. Last month, AstraZeneca sold U.S. co-commercialization rights for Movantik™ (naloxegol) to Daiichi Sankyo for up to $825 million.

    “Earnings were improved by partially selling off a number of its drugs, including Movantik. This raises a concern that the company might be trading in long-term opportunities to protect short-term earnings,” said Alistair Campbell, an analyst at Berenberg, according to Bloomberg News.

    Deutsche Bank analyst Richard Parkers said income from these agreements was of "questionable sustainability," Reuters reported.

    Eric Le Berrigaud, an analyst at Bryan Garnier & Co., told Bloomberg: “We’re not fully comfortable with the underlying trend.” He cited weaker-than-estimated sales of respiratory drug Symbicort® (budesonide/formoterol; $845 million, flat from a year ago) and blood thinner Brilinta®/Brilique™ (ticagrelor; $131 million, up 45% over Q1 2014 at constant exchange rates).

    AstraZeneca CEO Pascal Soriot defended the recent deals on a conference call: “It's more strategically driven than financially driven, though of course the financial aspects also help.”

    The company blamed its results on factors that include the strengthening of the U.S. dollar and a 14% year-over-year drop in U.S. product sales, to $2.169 billion. The U.S. sales slump was attributed to the loss of patent exclusivity for acid reflux treatment Nexium® (esomeprazole magnesium)—a generic version was launched in February—and increased competition for cholesterol-lowering drug Crestor® (rosuvastatin calcium) from generic statins.

    Sales of Crestor slid to $1.167 billion, down 7% from Q1 2014, while Nexium sales plunged 25% year-over-year to $644 million.

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