AstraZeneca Inks $6.9bn Deal With Daiichi Sankyo

AstraZeneca Inks $6.9bn Deal With Daiichi Sankyo
April 1, 2019


British pharmaceutical giant AstraZeneca Plc (AZN.L, AZN) revealed that Forxiga, an adult oral intake drug for Type 1 diabetes (T1D) had gained endorsement in Japan. Moreover, on Friday, the company expressed its intention to raise around $3.5 billion via a private placement of the company’s ordinary shares with both current and potential institutional investors.

Forxiga (dapagliflozin) has been endorsed by the Japanese Ministry of Health, Labor and Welfare or MHLW as an oral alternative to T1D insulin therapy for adults. The endorsement is based on the empirical data from the clinical research program Phase III DEPICT and a specific study in Japanese adult patients.

Results revealed that Forxiga exhibited considerable and clinically purposeful benchmark decrements in average blood glucose levels HbA1c (primary endpoint), weight and aggregate daily insulin dose (secondary endpoints) when offered as an oral medication in addition to insulin in patients with ineffectively handled T1D.

Of late, the European Commission recognized Forxiga as an alternative insulin therapy in adults suffering from T1D. For the same disease, the medication is under regulatory evaluation in the US, with a verdict anticipated in the latter half of 2019.

The company intends to utilize the money raised from the private placement to finance upfront and short-term payments for the global advancement and marketing cooperation deal with Daiichi Sankyo Co. (DSKYF.PK) for trastuzumab deruxtecan (DS-8201).

Under the $6.9billion deal with the Japanese drugmaker Daiichi Sankyo, AstraZeneca will jointly develop and market the cancer drug trastuzumab deruxtecan. Both companies intend to share the costs related to the development and commercialization of the drug.

AstraZeneca has agreed to pay $1.35 billion to Daiichi for costs related to the drug. Furthermore, the pharmaceutical company will spend another $5.6 billion on meeting regulatory and sales milestones.

Regarding trastuzumab deruxtecan, Pascal Soriot, AstraZeneca’s chief executive said that trastuzumab deruxtecan “could become a transformative new medicine for the treatment of HER2 positive breast and gastric cancers”.

AstraZeneca said Daiichi Sankyo’s partnership is anticipated to strengthen its science-based oncology method based on four major scientific platforms. It also conforms to the financial goals and investment preferences of the company.

The funds raised will also be used to pay back AstraZeneca’s $1 billion, 1.95% notes outstanding on September 18th, 2019, and to enhance the soundness of the balance sheet and ability to meet financial obligations (liquidity) of the company. The total effect of the fundraising deal and the placement is anticipated to be neutral to the core earnings per share of AstraZeneca in 2019, increasing core EPS accumulation from 2020 to a considerable contribution by 2023.

In addition, AstraZeneca has reiterated its 2019 revenues and core EPS view at constant currency exchange rates post-placement and transaction. The company also confirms that there is no modification to the progressive dividend scheme of the company. The financial transaction will take effect on March 29th, 2019. The placement is not contingent on the deal being completed.

The approval for Forxiga by the Japanese Ministry of Health, and development and commercialization deal with Daiichi Sankyo is expected to turn the stock of AstraZeneca bullish in the short-term.

Technically, the stock is trading above its 50-day moving average. Likewise, the MACD indicator has a positive reading. As a result, we can expect the stock to remain bullish in the days to come.

azn - technical analysis - 1st April 2019

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Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world

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