Astra’s $6.9bn cancer drug tie-up is biggest in a decade

ASTRAZENECA has agreed its biggest deal in more than a decade to develop and sell a potentially “transformative” cancer medicine, as the race to find the next blockbuster oncology drug heats up.

The FTSE 100 drug maker will pay Japanese firm Daiichi Sankyo up to $6.9bn (£5.3bn), starting with an upfront amount of $1.35bn, to help share the global cost of developing and commercialising the drug, which is known as trastuzumab deruxtecan. Astra believes the drug has the potential to provide new treatment options for multiple cancers, including breast and gastric, as it pushes to restock its oncology pipeline with new medicines.

The treatment targets a particular gene, HER2, that can play a role in the development of certain cancers.

Shares in Astra closed down 5.6pc, making it the largest faller on the FTSE 100, as the drug maker said that the deal would be partly funded through a $3.5bn share placing. Shares in Daiichi, which will retain the exclusive rights to the medication in the Japanese market, surged 16pc.

Pascal Soriot, Astra’s chief said the deal would accelerate its push for growth for “the next five and 10 years”.

The UK drug maker has earmarked up to $5.55bn for further payments contingent on regulatory events and sales targets.

The company added that there would be no change to its outlook or dividend. Analysts at Jefferies yesterday said there was strong rationale for boosting Astrazeneca’s pipeline but added that “the terms seem onerous”.

The world’s biggest pharmaceutical companies are competing to dominate in oncology, with a flurry of big pharma acquisitions in recent months.

It follows a string of blockbuster deals in the pharmaceutical industry, including a similar $4.2bn cancer-focused tie-up between Glaxosmithkline and Germany’s Merck in February. This year has already seen the $74bn sale of US biotech firm Celgene to Bristol-myers Squibb in one of the sector’s biggest ever deals.

Oncology revenues at Astra jumped 58pc in the final quarter of 2018, boosted by soaring sales of new cancer drugs Tagrisso and Lynparza.

Overall, the company returned to growth on the back of new medicines and strong demand from emerging markets.