AstraZeneca (AZN) to Build $1.5B Cancer Drug Plant in Singapore

AstraZeneca AZN announced its plans to spend $1.5 billion to build its first manufacturing facility in Singapore. Once built, it will be the company’s first facility to cover the full manufacturing process for its antibody drug conjugates (ADCs) portfolio at a commercial scale.

ADCs are next-generation treatments that target cancer cells by delivering highly potent cancer-killing agents through a targeted antibody.

AstraZeneca is building the manufacturing site to ensure a safe and reliable supply of ADCs. Per management, ADCs have demonstrated ‘enormous potential’ to replace traditional chemotherapy across many settings. The company has a broad portfolio of in-house ADCs, including six wholly-owned ADCs in its clinical pipeline and many more in preclinical development.

With support from Singapore’s government, AstraZeneca intends to start construction before the end of this year and expects it to be operational beginning in 2029. Per management, the facility will emit zero carbon from the start.

AstraZeneca’s shares have risen 14.2% year to date compared with the industry’s 15.3% growth.

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AZN’s focus on ADCs comes from the success achieved by the company from its only marketed ADC drug in its portfolio, Enhertu, which has been developed in collaboration with partner Daiichi Sankyo.

Per the partnership terms, Daiichi Sankyo recognizes the U.S. sales of Enhertu while AstraZeneca records its share of gross profit margin from Enhertu sales under Alliance revenues. Daiichi Sankyo is responsible for the manufacturing and supply of Enhertu.

Enhertu is presently approved across multiple indications, including advanced or metastatic HER2-positive gastric cancer, previously treated HER2-mutant metastatic non-small cell lung cancer (NSCLC) and metastatic HER2-positive and HER2-low breast cancer. The fifth indication, i.e., metastatic HER2-positive solid tumors, was approved by the FDA last month.

Since its initial launch in 2019, Enhertu has shown an impressive initial uptake. During the first quarter of 2024, Enhertu generated around $339 million in alliance revenues for AstraZeneca.

Both companies are also developing a second ADC drug, datopotamab deruxtecan, across multiple late-stage studies targeting several cancer indications across different treatment settings.

The ADC space has garnered much interest from big pharma, especially in the last year when bigwigs Merck MRK and Pfizer PFE made multi-billion-dollar deals in this space.

Pfizer forayed into this space when it acquired ADC drugmaker Seagen last year for $43 billion. Post this acquisition, Pfizer added three ADCs to its portfolio — Adcetris (brentuximab vedotin), Padcev (enfortumab vedotin) and Tivdak (tisotumab vedotin) — all approved across solid tumors and hematologic malignancies. Per the deal, Pfizer also acquired Seagen’s proprietary ADC technology.

To boost its oncology portfolio, Merck entered into an agreement with Daiichi Sankyo to jointly develop and market three investigational ADC drugs for a total potential consideration of up to $22 billion. Merck’s deal with Daiichi involves three ADCs, namely patritumab deruxtecan, ifinatamab deruxtecan and raludotatug deruxtecan, which are across multiple solid tumor indications in different stages of clinical development. Per Merck, this deal holds multi-billion dollar worldwide commercial revenue potential for each company approaching the mid-2030s.

The terms of the deal entered between Merck and Daiichi are similar to the ones entered between AstraZeneca and Daiichi. Though Daiichi and Merck will equally share expenses and profits, the former will be solely responsible for manufacturing and will also generally book sales worldwide.

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Zacks Rank

AstraZeneca currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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