Oxford Biomedica. 2005 to see 'Huge value creation' (Panmure Gordon)

First we have GSK stating their intention to move into the cancer field, and now we have Astra Zennecca doing likewise. Although in their case they've put their money upfront. Looks to be an interesting 2006.

Good luck to all.

AstraZeneca buys its way into cancer therapy with DNA repair deal

Published: 11:52 Friday 23 December 2005
By Douglas Bence, Companies Correspondent

Drug giant AstraZeneca is buying the privately-owned UK biotechnology KuDOS Pharmaceuticals for around $210 million (£121 million) cash.

The precise figure will depend on KuDOS’ debt and working capital when the deal closes early in the New Year.

KuDOS specialises in cancer therapies, an area AstraZeneca is keen to expand by strengthening its portfolio of existing treatments and to develop new ones. The shares rose 24p to £28.02.

Merchant bankers Lazards advised the KuDOS shareholders, which include a number of investment funds represented by Advent Venture Partners, BankInvest Biomedical Venture, Euclid SR Partners, Johnson & Johnson Development Corporation, Life Science Partners, 3i and SV Life Sciences.

Key to the deal is the repair platform developed by KuDOS Pharmaceuticals in association with its founder, Professor Stephen Jackson of Cambridge University. This involves different approaches towards the inhibition of enzymes involved in the responses to various types of DNA damage.

Potentially, DNA repair inhibitors can kill cancer cells either as stand-alone therapies or by enhancing the efficacy of both chemo and radio therapies. KuDOS’ compound KU 59436 is an oral poly-ADP-ribose polymerase (PARP) enzyme inhibitor currently in Phase I of its clinical development.

As well as being what is known as a key signalling enzyme involved in triggering the repair of single strand DNA damage, PARP inhibition selectively kills tumour cells lacking the homologous recombination DNA repair pathway while sparing normal cells.

With healthcare sales worth over $21.4 billion, AstraZeneca is Europe’s number three drug company and is particularly strong in gastrointestinal, cardiovascular, respiratory, oncology and neuroscience products. It has high hopes that KU 59436 can be developed for the treatment of breast and ovarian cancer.

KuDOS Pharmaceuticals has 75 staff which will remain at its offices in Cambridge and Horsham, Sussex, and become a hub for AstraZeneca’s DNA repair discovery activities.

On Thursday AstraZeneca said it had agreed a deal to license atherosclerosis drug AGI-1067 from the US company AtheroGenics which is designed to fight hardening of the arteries which can cause both stokes and heart attacks.

Citywire Verdict:

The City is supposed to have fallen out of love with AstraZeneca last year on news that three of its big sellers faced competition from generic or copycat drugs. There were also the problems of the failure of lung cancer drug Iressa and the scrapping of the anti-clotting therapy Exanta. Both were close to launch.

Even so the shares have climbed 48% this year, partly because of takeover speculation. The deal with AtheroGenics gives AstraZeneca four products in Phase lll clinical trials, the others being Cerovive for strokes, Galida for diabetes and Zactima for cancer.

KU 59436 is not so advanced, but it at least shows the company is doing what it can to improve its much criticised pipeline. The downside is limited and the shares look a reasonable medium to long term buy on weakness.