AstraZeneca's New Cancer Treatments Could Have Long-Term Growth Potential

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In a previous article, I discussed the steep challenges facing pharma giant AstraZeneca (NYSE: AZN  ) . Last quarter, it reported sales declines in eight major treatments, which together accounted for 42% of its top line.

It is still reeling from the patent expiration of its top-selling antipsychotic Seroquel, and will soon face the U.S. expirations of asthma treatment Symbicort and acid reflux medication Nexium. A series of pipeline failures also darkened the company's post-patent-cliff future.

AstraZeneca's new CEO, former Roche (NASDAQOTH: RHHBY  ) executive Pascal Soriot, plans to concentrate R&D efforts on three main areas -- heart disease and diabetes, respiratory and inflammation, and oncology.

Let's take a look at the opportunities and growth potential of AstraZeneca's oncology portfolio, which could provide growth beyond its current blockbuster drugs.

Treating a tough mutation
One of AstraZeneca's promising drugs is AZD9291, an experimental non-small-cell lung cancer drug that could treat patients with the rare genetic mutation known as T790M.

The T790M mutation is a particularly tough one -- it is resistant to both Roche/Genentech's Tarceva and AstraZeneca/Teva's Iressa, two widely used first-generation EGFR, or epidermal growth factor receptor, tyrosine kinase inhibitors. The overexpression of tyrosine kinase can lead to uncontrolled cell division and proliferation, causing various forms of cancer.

In an ongoing phase 1 study, AstraZeneca reported that it is considering accelerating the development AZD9291 to treat EGFR mutations including T790M, and that the drug had already showed "encouraging results" in treating NSCLC.

Other treatments for NSCLC mutations
Although AstraZeneca is making progress with this drug, there are some other promising treatments worth paying attention to. Pfizer's (NYSE: PFE  ) dacomitinib and Boehringer Ingelheim's Gilotrif are both second-generation EGFR inhibitors that may eventually succeed Tarceva and Iressa. Both treatments are also targeting hard-to-treat mutations.

Pfizer's dacomitinib is currently in clinical trials for NSCLC and has completed a phase 2 trial for head and neck cancer. Preliminary data from the trials suggests that patients with EGFR mutation-positive NSCLC reported tumor shrinkage, while another study demonstrated better progression-free survival rates than Tarceva. Pfizer, which is also dealing with patent expirations, plans to streamline its oncology efforts with an upcoming three-way restructuring of its businesses.

Boehringer Ingelheim's Gilotrif is a second-generation EGFR inhibitor that has been approved by the FDA. During a phase 3 clinical trial, the drug improved the period of progression-free survival when compared with standard chemotherapy in patients with EGFR mutation-positive NSCLC.

AstraZeneca expands into "cancer smart bombs"
To further expand its oncology presence, AstraZeneca recently made two deals to build its portfolio of antibody-drug conjugates (ADCs), which are often referred to as "cancer smart bombs."

ADCs are lab-created antibodies, filled with toxic payloads, which are programmed to seek out certain cancer cells and bind to them. Once ADCs bind to the targeted cancer cells, they inject their toxins into them, killing them from the inside while sparing healthy cells nearby. Therefore, ADCs could prove to be a more effective treatment than traditional chemotherapy, which kills both cancerous and healthy cells.

In the first deal to expand its ADC pipeline, AstraZeneca's MedImmune unit bought Spirogen for an initial $200 million, and will pay an additional $240 million if Spirogen meets certain development milestones. In a second deal, it purchased a $20 million stake in ADC Therapeutics Sarl.

With these two investments, AstraZeneca gains access to the two companies' ADC technologies, which could help it keep up with ImmunoGen  (NASDAQ: IMGN  ) and Seattle Genetics (NASDAQ: SGEN  ) , which each gained FDA approval for their ADCs  -- the breast cancer treatment Kadcyla (which Roche licensed from ImmunoGen) and the blood cancer drug Adcetris.

Seattle Genetics is currently the largest pure-play ADC company on the market, although there are many other smaller companies developing these treatments, such as ImmunoGen, Celldex, and Immunomedics. The game-changing potential of ADCs has drawn plenty of larger collaborators to these companies, including Bayer (partnered with Seattle Genetics) and Novartis (partnered with ImmunoGen), which are both interested in expanding their ADC pipelines.

Prior to the two new investments, AstraZeneca only had one similar "armed antibody" in its pipeline -- a treatment for hairy cell leukemia currently in phase 3 trials.

The Foolish takeaway
AstraZeneca's significant progress in oncology could be a big step in the right direction for the troubled company, but it won't be the magic bullet to solve all of its problems. Like its industry peers Merck and Eli Lilly, AstraZeneca's success ultimately depends on its ability to end a streak of pipeline failures. However, AstraZeneca's new cancer treatments, if eventually approved by regulatory bodies, could generate a sustainable -- and much needed -- new source of revenue.

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