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AstraZeneca and Merck enter oncology collaboration

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AstraZeneca and Merck & Co have entered a global strategic oncology collaboration to co-develop and co-commercialise AstraZeneca’s Lynparza (olaparib) for multiple cancer types.

Lynparza is an oral poly ADP ribose polymerase (PARP) inhibitor currently approved for BRCA-mutated ovarian cancer in multiple lines of treatment. Lynparza’s pipeline has grown in the last few years, with 14 indications currently being developed across several tumour types, including breast, prostate and pancreatic cancers. The strategic collaboration is expected to further increase the number of treatment options available to patients.

The companies will develop and commercialise Lynparza jointly, both as monotherapy and in combination with other potential medicines. Independently, the companies will develop and commercialise Lynparza in combination with their respective PD-L1 and PD-1 medicines, Imfinzi(durvalumab) and Keytruda (pembrolizumab).The companies will also jointly develop and commercialise AstraZeneca’s selumetinib, an oral, potent, selective inhibitor of MEK, part of the mitogen-activated protein kinase (MAPK) pathway, currently being developed for multiple indications including thyroid cancer.

“Our strategic collaboration builds on scientific evidence that PARP and MEK inhibitors can be combined with PD-L1/PD-1 inhibitors for a range of tumours. By bringing together the expertise of two leading oncology innovators, we will accelerate Lynparza’s potential to become the preferred backbone of many immuno-oncology combination therapies as the world’s first and leading PARP inhibitor. This is a truly exciting step and we are pleased to work with Merck, a company that shares our passion for science to deliver new medicines for cancer patients,” said Pascal Soriot, Chief Executive Officer of AstraZeneca.

Financial considerations

Under the terms of the agreement, AstraZeneca and Merck will share the development and commercialisation costs for Lynparza and selumetinib monotherapy and non-PD-L1/PD-1 combination therapy opportunities. Gross profits from Lynparza and selumetinib Product Sales generated through monotherapies or combination therapies will be shared equally.

Merck will fund all development and commercialisation costs of Keytruda in combination with Lynparza or selumetinib. AstraZeneca will fund all development and commercialisation costs of Imfinzi in combination with Lynparza or selumetinib.

AstraZeneca will continue to manufacture Lynparza and selumetinib.

As part of the agreement, Merck will pay AstraZeneca up to $8.5 billion in total consideration, including $1.6 billion upfront, $750 million for certain license options and up to $6.15 billion contingent upon successful achievement of future regulatory and sales milestones.Under the terms of the agreement, AstraZeneca anticipates approximately $1 billion to be recorded under Externalisation Revenue in 2017.

AstraZeneca will book all Product Sales of Lynparza and selumetinib; gross profits due to Merck under the collaboration will be recorded under Cost of Sales. The initial, regulatory and commercial milestone payments will be recorded under Externalisation Revenue. The transaction does not impact AstraZeneca’s 2017 financial guidance. AstraZeneca continues to anticipate that the sum of Externalisation Revenue and Other Operating Income in FY 2017 will be ahead of that in FY 2016.

The collaboration agreement was completed upon signing on 26 July 2017.

For the purposes of the UK Listing Authority’s Listing Rule LR 10.4.1 R (Notification of class 2 transactions), the book value of gross assets subject to the license and collaboration is approximately $242 million. In view of the development and early growth phase of the medicines, a pre-tax loss of $231 million was attributable to Lynparza and selumetinib in aggregate in the year to 31 December 2016.

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