Astrazeneca's dealing cannot mask its problems

Pascal Soriot’s latest wheeling and dealing will see Astrazeneca get a chunky up-front fee for the European rights to an ageing brand that brings in little over $100m per year. If the agreement with Recordati for the cardiovascular assets Seloken and Logimax looks like good business sense, it is nonetheless another example of how Astra is using its externalisation strategy to mask underperformance in its core business.

The move will do little to inspire confidence that the company can harness the more traditional pharma growth engine: innovative new drugs. And a look at Astra’s drug portfolio should cause more disquiet. Of its forecast top-five assets in 2022, four are already marketed and one, the recently approved Imfinzi, is a late entrant to the PD-(L)1 party (see table below).

Astra's top five products in 2022
Project Description First FDA approval date 2016 sales ($m) 2022e sales ($m)
Tagrisso Lung cancer drug  Accelerated approval 2015; full approval 2017 423 2,386
Imfinzi/durvalumab PD-L1 cancer drug  2017 - 2,318
Farxiga Type 2 diabetes drug 2014 835 1,930
Brilinta Blood thinner 2011 839 1,682
Symbicort Turbuhaler Asthma/COPD inhaler 2006 2,989 1,567
Source: EvaluatePharma

Astra’s first-quarter sales dipped 12% as it contended with generic Crestor in the US, but externalisation revenues grew 2% to $562m, representing 10% of total sales. In 2016, these sales accounted for 7% of the company’s overall revenues.

It is hard to see where long-term growth will come from for Astra. Its brightest phase III prospect, according to EvaluatePharma sellside consensus, is the CTLA4 MAb tremelimumab, which is far from a sure bet. 2022 sales are forecast to reach $1.1bn. The much-anticipated data from the Mystic combo study with Imfinzi should be out mid-year, and if they disappoint Astra will be in even greater need of new blood.

In the nearer term things look a little better. Astra’s top prospect, the EGFR inhibitor Tagrisso, received full FDA approval this year in second-line non-small cell lung cancer (NSCLC) and could get a further boost if it performs in the first-line Flaura study.  

But it has not all been good news. The type 2 diabetes therapy Farxiga could be hurt by an increased risk of lower limb amputation with Johnson & Johnson’s fellow SGLT2 inhibitor Invokana, if this turns out to be a class effect.

And even if it is not, Farxiga will not report cardiovascular outcomes data until 2019, by which time Boehringer’s Jardiance will have made the most of its head start.

Without other solid growth engines, Astra might be forced into making more deals like the one with Recordati, which will see the former receive $300m upon close, expected in the second quarter, plus double-digit royalties. Sales of the Seloken brands and Logimax were $110million in Europe in 2016; Astra will continue selling them in all other markets.

A year of Astra’s out-licensing deals
Product Partner Region Externalisation revenue Date
MEDI8897 Sanofi Pasteur Global Initial €120m ($135m);
Up to €495m in sales and development-related milestones
Mar 17
Zoladex TerSera US & Canada Initial $250m;
Up to $70m in sales-related milestones;
Mid-teen percentage royalties on sales
Feb 17
Toprol-XL Aralez Pharmaceuticals US Initial $175m;
Up to $48m milestone and sales-related revenue;
Mid-teen percentage royalties on sales
Oct 16
Tralokinumab in atopic dermatitis LEO Pharma Global Initial $115m;
Up to $1bn in commercially-related milestones;
Up to mid-teen tiered percentage royalties on sales
Jul 16
Anaesthetics Aspen Global Global (ex-US) Initial $520m;
Up to $250m in sales-related revenue;
Double-digit percentage trademark royalties on sales
Jun 16
Source: Astrazeneca Q1 results

The latest agreement adds to a slew of others that Astra has made in the past year, which have brought in a valuable revenue stream but hardly set the pulses of investors racing. Calls for Astra to buy in new growth could soon intensify.

Project Trial Setting ID Primary completion
Tagrisso Flaura  First-line NSCLC vs Iressa or Tarceva NCT02296125   May 17
Farxiga Declare-Timi58 Cardiovascular outcomes study NCT01730534 Apr 19

To contact the writer of this story email Madeleine Armstrong in London at madeleinea@epvantage.comor follow  @ByMadeleineA on Twitter

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