Why These Companies Are Shooting for the Moon

Find out why the pharmaceutical industry’s biggest players are partnering with MD Anderson’s Moon Shots Program.

Mar 21, 2014 at 6:30PM

AstraZeneca (NYSE:AZN) investors have watched their company's net income plummet 74% over the past two years. If I were one of those shareholders, the last thing I would expect to hear is that the company is shooting for the moon, but strangely enough, that's exactly what it's doing. Surprisingly, it's a great idea.

Earlier this month AstraZeneca became the latest big player to climb on board the MD Anderson Cancer Center's Moon Shots Program, whose name was "inspired by America's drive a generation ago to put a man on the moon," according to the website. The program aims to defeat cancer through a big research collaboration. The hospital has already signed up GlaxoSmithKline (NYSE:GSK)Pfizer, and Johnson & Johnson. Here's why these industry giants are getting involved.

A strong lineup
It's hard to overstate the excitement surrounding cancer immunotherapies. Analyst projections vary, but many think more than half of all cancer treatments will include some form of immunotherapy in the next decade. Dr. James Allison, whose seminal work helped lead to the first approved drug to exploit an immune checkpoint blockade, Bristol-Myers Squibb's (NYSE:BMY) Yervoy, was recently hired by MD Anderson and given over $40 million in immunotherapy research-related grants. As a leading researcher in immune-oncology, his involvement is a major boost to the Moon Shots Program.

What success looks like
Since its approval in March 2011, Yervoy has been a major success both clinically and commercially. About 22% of 1,800 advanced stage melanoma patients treated with Yervoy were alive after three years, a substantial improvement over previous treatments.

Despite its single indication for advanced melanoma, Bristol-Myers recorded $960 million in Yervoy sales last year. It's currently in trials for lung and prostate cancer, and investors are giddy with hopes of winning those supplementary approvals. MD Anderson's partners are hoping to get a Yervoy of their own.

Catch up
Yervoy acts on just one of several pathways that cancer cells use to hide from the immune system. Bristol-Myers and Merck (NYSE:MRK) are pushing candidates that act on the PD-1 pathway through late-stage trials. Bristol's nivolumab is in over 25 trials covering 9 separate indications. Merck has done far less with MK-3475, but has already started a rolling submission of a biologics license application for melanoma that it expects to complete in the first half of the year.

AstraZeneca has several immune checkpoint inhibitors in early to mid-stage development. Working with the field's pioneers in a center with access to a large variety of patients should accelerate their progress.

It's cheap
Building, staffing, and operating a research facility capable of these trials and research, like the MD Anderson Cancer Center, can be an enormous cost. If you want to know how bad it gets, look at the hermit of the pharmaceutical industry, Eli Lilly (NYSE:LLY). Lilly's CEO John Lechleiter regularly insists that its internal R&D can get the job done without a merger, and the company even seems to generally avoid collaboration agreements. Over the past six years Lilly has spent $28.9 billion on R&D with almost nothing to show for it. From 2008 through 2013, Lilly won FDA approval for just two new molecular entities. Analysts estimate they will contribute a measly $0.5 billion to Lilly's top line in 2018.

What winners look like
GlaxoSmithKline seems to collaborate with anyone that answers the phone. Over the same period the company spent $37.9 billion for 20 NME approvals worth an estimated $11.7 billion by 2018.

Glaxo's Moon Shot deal with MD Anderson could cost the company $335 million, plus royalties. That's a small price to pay for a potential blockbuster like Yervoy. Just as important is the limited risk involved in this sort of collaboration agreement. If MD Anderson can't deliver a winner, Glaxo can walk away. There's no facility to shut, and no employees to lay off.

GSK Chart

GSK data by YCharts

The important takeaway for investors is that partnerships with winners like the MD Anderson Cancer Center are worth a shot, even if they are aiming for the moon. Don't just take my word for it. Look at the chart above. Which would you rather own a company ready to partner with the likes of MD Anderson, or a hermit like Eli Lilly? 

Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers