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AstraZeneca (AZN) Inks Deal to Enter Novel RNA Therapeutic Space

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AstraZeneca (AZN - Free Report) signed a strategic, long-term research collaboration agreement with VaxEquity, a startup founded by the Imperial College London and Morningside last year, to diversify its pipeline into the novel RNA-based therapeutic space.

Per the deal, the former will gain a license to discover, develop and commercialize therapies using the latter’s proprietary self-amplifying RNA (saRNA) therapeutics platform developed at the Imperial College London. The deal provides AstraZeneca with an option to collaborate with VaxEquity for up to 26 drug targets.

AstraZeneca will disburse VaxEquity up to $195 million of several milestone payments per program, if it chooses to advance any of the research studies into its pipeline. AstraZeneca will also pay royalties on the sales of any successful therapy developed under the agreement. It will also invest in VaxEquity for further development of the saRNA platform.

Although pharma/biotech companies and academic institutions across the globe have been researching on RNA-based therapeutics for the past three decades, the technology came into the limelight following the ubiquitous success of mRNA-based COVID-19 vaccines from Moderna (MRNA - Free Report) and Pfizer (PFE - Free Report) /BioNTech (BNTX - Free Report) .

An RNA-based approach provides the option to quickly design a therapy based on genetic mutation and may lend an opportunity to aim at those genes that cannot be targeted by conventional small molecules, thus leading to better therapeutic options. Moreover, the production of RNA-based therapies is likely to be easy and cheap compared to available conventional therapies.

The recent agreement signed by AstraZeneca also reflects the company’s faith in the strong potential of RNA-based therapies.

This year so far, shares of AstraZeneca have rallied 19% compared with the industry’s increase of 8.6%.

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Although the mRNA-based COVID-19 vaccines were developed by encoding instructions into RNAs, the saRNA technology seems to have an advantage over mRNA-technology. For example, a saRNA-based vaccine will not only encode instructions into RNAs like mRNA-based vaccines but will also help making multiple copies of RNA, containing instructions. This factor can contribute towards making smaller doses of a vaccine, which may also lower the vaccine price as well as accelerate its production.

Successful development of therapies based on the saRNA platform will likely aid AstraZeneca to grab a significant opportunity for improving its business performance with novel therapies. However, the RNA space is a novel technology with a few pharma/biotechs already engaged in developing therapies/vaccines using it. Several new players will likely enter the space attracted by the huge success of the mRNA-based COVID-19 vaccines.

GlaxoSmithKline and two U.S.-based private companies are already using the saRNA technology to develop vaccines targeting different indications including rabies, COVID-19 and cancers.

New entrants will definitely increase competition in the space. However, the early adopters like AstraZeneca and Moderna are likely to gain the most going forward.

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

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