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AZ shares climb on positive cancer drug news

Published on 01/09/14 at 09:17am

AstraZeneca has moved a key new oncology drug into mid-stage trials as it looks to shore up its cancer research pipeline.

UBS analyst Alexandra Hauber tells investors that the treatment “is a potentially multi-blockbuster opportunity, given that colorectal cancer is the third leading cause of cancer-related deaths in the US”.

The update came over the weekend when AZ added new Phase II enrolment data on the public study site

MEDI-4736 is part of a closely-watched class of drugs known as anti-PD-L1 therapies, which can essentially teach the body to help fight tumours.

Merck, Roche, AstraZeneca and Bristol Myers-Squibb (BMS) are all working on drugs designed to boost the immune system’s capacity to fight tumours in a market that could be worth around $30 billion by the end of the decade.

AZ is bullish about its prospects for the drug, forecasting potential peak sales for MEDI-4736 of $6.5 billion, including use in combination therapies.

Merck and BMS are currently leading the PD-1 race to market with their drugs pembrolizumab and nivolumab respectively, which are both looking for a melanoma licence, expected to gain US approval in 2015.

AZ will likely be third or even fourth to market with its PD-1 inhibitor, but will most likely be the first in this new class of medicines for colorectal cancer.

Current treatments for this disease include Roche’s Avastin (bevacizumab) and Merck KGaA’s Erbitux (cetuximab), both of which target certain genetic sub-types of the colorectal cancer.

AstraZeneca is due to present more data on MEDI-4736 in lung cancer and head and neck cancer at an oncology conference in Madrid at the end of September.

Pfizer deal

These latest data is both a sword and shield for AZ with its ongoing battle with US giant Pfizer, which attempted to buy the firm in May for $118 billion.

Pfizer failed in its bid but can from tomorrow begin private talks with the firm about a renewed bid, should AZ want to play ball. If not, it cannot make another public offering for the company until 26 November.

But hopes are growing that a deal is still on the cards and investors have sent AZ’s shares up almost 12% in the last fortnight on speculation talks between the two companies might be revived.

The latest MEDI-4736 will be an attractive prospect for Pfizer, given how well it can fit within its own new focus on oncology, and the fact that it is not currently in the PD-1 race.

But on the other side AZ will be buoyed by the new data as a reassurance to its shareholders that it can produce strong revenue in the future on its own, without the need to be merged into Pfizer.

Ben Adams

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