AstraZeneca PLC (LSE:AZN) has agreed a licensing deal potentially worth almost as much as the market capitalisation of the Californian biotech it is teaming up with.
The transactions could see AZ hand over as much as US$3.585bn to Ionis Pharmaceuticals (NASDAQ:IONS) Inc (current valuation US$3.88bn).
The figure includes an upfront US$200mln and US$458mln of payments based on negotiating certain regulatory hurdles.
The big windfall, up to US$2.9bn, comes in sales-related ‘milestones’ available at revenue thresholds between US$500mln and US$6bn.
This is not to mention possible royalty payments of “low double-digit to mid-twenties percentage depending on the region”.
The transaction reveals the pricing power drug developers such as Ionis have once they have negotiated the early tricky clinical trial process where the failure rate is high.
The therapy, which is called Eplontersen, is being developed for a progressive and fatal heart condition called ATTR-CM.
It is currently in phase III clinical trials, where the chances of success are so much higher than they are in phase I, or phase II (the point at which companies such as Ionis normally check out).
It is expected that a new drug application for the Ionis breakthrough will be filed by the end of next year.
Thanks to its precise liver-targeting properties, Eplontersen has the potential to be a best-in-class treatment for patients suffering from ATTR-CM who currently have limited options, said Mene Pangalos, AZ’s head of biopharmaceutical R&D.
Investors greeted the news with a collective 'meh'. On a day when the FTSE 100 was up 85 points, AZ shares were down 1.2%, chipping around £1.5bn off the market value of the company.
---updates with AZ share price movement---