AstraZeneca results in line as new partnership struck with Merck, Mystic disappoints

AstraZeneca performed in line with expectations in the first half of 2017, it reported on Thursday, but the drug giant also announced disappointing results from a key lung cancer trial.

Giving an update on its key 'Mystic' trial in stage IV lung cancer, Astra revealed that a combination of its Imfinzi and tremelimumab drugs failed to meet a primary target of progression-free survival compared to chemotherapy in patients with metastatic (Stage IV) first-line non-small cell lung cancer.

The company said that while the results were disappointing, the trial was designed to assess overall survival and it will now evaluate the remaining primary endpoints of overall survival for both mono- and combination therapy, with final data expected during the first half of 2018.

For the first six months of the year total revenue fell 11%, or 9% at constant currencies, to $10.46bn, with product sales down 11% to $9.78bn and externalisation revenue down 2% to $673m. At constant exchange rates, those two readings were off 10% and 1% respectively.

The FTSE 100 drugmaker reported an 11% fall in product sales to $9.78bn - or 10% at constant currencies - while reported operating profit surged 37% to $1.84bn, or 22% at constant currencies.

Its core operating profit was $3.22bn - a total rise of 7%, or 3% at constant exchange rates.

Reported earnings per share totalled 80 cents, up 58%, while core earnings per share were 5% stronger at $1.86.

At constant currencies, those two figures were 41% and 1% higher than the same period last year.

After the first quarter, management gave guidance of total revenue to decline by "a low to mid single-digit percentage" and core EPS down "a low to mid teens percentage".

“Our performance in the first half was in line with expectations as we experience the loss of exclusivity of Crestor and Seroquel XR in the US,” said chief executive Pascal Soriot.

“We continued to deliver transformative science across the pipeline, particularly in Oncology.”

Imfinzi was launched in bladder cancer during the period, while AstraZeneca published “practice-changing” data in breast cancer for Lynparza, its first-in-class PARP inhibitor.

“In lung cancer, we strengthened our unique portfolio focused on both the genetic drivers of disease and immunotherapy,” Soriot explained.

“In the first half, we shared positive results for Imfinzi in the PACIFIC trial and reported more encouraging data for Tagrisso in patients with central nervous system metastases.”

Soriot said the company was “excited” about its pipeline-driven transformation as it continued to deliver for shareholders on its strategy to return to sustainable long-term growth.

“In a pivotal year for AstraZeneca, we remain focused on realising the potential of our pipeline, growing our new launch medicines and bringing our strong science to patients.”

In a separate announcement on Thursday, AstraZeneca aso confirmed a new partnership with Merck & Co to co-develop and co-commercialise AstraZeneca’s ‘Lynparza’ treatment for multiple cancer types.

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).

Both firms 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,” said Pascal Soriot.

“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.”

Soriot called it a “truly exciting step”, adding that AstraZeneca’s board was “pleased” to work with Merck.

Chief executive of Merck, Kenneth C. Frazier, said the global collaboration between AstraZeneca and his company would “increase the possibilities” for patients to have more treatment options for more cancers.

“Merck continues to build its leadership in immuno-oncology with Keytruda as foundational in monotherapy and combination therapy, and this collaboration expands our oncology leadership into the growing targeted therapies of PARP and MEK inhibitors.

“We look forward to working with AstraZeneca to create greater value for patients and shareholders than if both companies worked independently.”

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 generated from Lynparza and selumetinib product sales generated through monotherapies or combination therapies would be shared equally.

Merck would fund all development and commercialisation costs of Keytruda in combination with Lynparza or selumetinib, while AstraZeneca will fund all costs of Imfinzi in combination with either of the two partnership drugs.

As part of the deal, Merck will pay AstraZeneca up to $8.5bn in total consideration, including $1.6bn upfront, $750m for certain license options and up to $6.15bn contingent on successful achievement of future regulatory and sales milestones.

AstraZeneca said it anticipates around $1bn to be recorded under externalisation revenue in 2017.

AstraZeneca will book all product sales of Lynparza and selumetinib, and 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.

AstraZeneca said the transaction would not impact its 2017 financial guidance, and it continued to anticipate that the sum of externalisation revenue and other operating income in 2017 would be ahead of that in the 2016 financial year.