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AstraZeneca raises $3.5bn

The pharma giant has asked investors to help it fund a new drug development partnership –and to pay down some of its debt
April 1, 2019

AstraZeneca (AZN) has raised $3.5bn (£2.7bn) via a share placing to help fund a new partnership with Japanese pharma group Daiichi Sankyo. The two groups will work together to develop a new treatment – currently known as trastuzumab deruxtecan (DS-8201) – into a ‘blockbuster’ cancer drug, targeting annual sales of $4.5bn. The £60.50 placing price represented a 7 per cent discount to the closing price the day prior to the transaction being announced. 

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The two healthcare giants have a collaborative history, but this marks their largest tie-up to date. It is hoped the new medicine will treat multiple forms of cancer, and it is expected an application will be filed with US regulators to approve the drug for use in breast cancer patients later this year – ahead of the original 2020 schedule. Initially, Astra will pay $1.35bn upfront, with a further $5.6bn due if certain regulatory and sales targets are met. But, for now, the remainder of the funds raised by the placing will go towards repaying $1bn-worth of Astra’s 1.95 per cent notes, which are due in September 2019. For now, the Anglo-Swedish group has not made any changes to 2019 guidance or its dividend policy, although it expects an acceleration in EPS from 2020, and a "significant contribution" in 2023.

AstraZeneca did return to revenue growth in the third quarter of 2018 following a strong performance from newly launched drugs and good demand from emerging markets. And while a decent top-line acceleration has soothed some concerns about the drug developer’s future growth strategy, others are sceptical of the high-risk approach. The group’s future drug pipeline might appear to be full of potential – bolstered once again by this latest deal – but the associated clinical risks are still prevalent.