Why the US Is Paying $486 Million to Test AstraZeneca's COVID-19 Drug Cocktail

Health and Healthcare

Published: October 12, 2020 11:09 am

The U.S. Department of Health and Human Services (HHS) and the U.S. Department of Defense have agreed to supply about $486 million to drugmaker AstraZeneca PLC (NYSE: AZN) to develop the company’s AZD7442 COVID-19 treatment and vaccine. The funds will help support two trials of the company’s cocktail of drugs, both as a medicine to prevent infection and a pre-emptive treatment for patients who already have been infected with COVID-19.

AZD7442 is different from the company’s other drug, dubbed AZD1222, further trials of which were put on hold by the U.S. Food and Drug Administration (FDA). A U.K. participant in the late-stage clinical trial developed an unexplained illness after receiving a dose of AZD1222. In many countries, including the United Kingdom, clinical testing was allowed to resume. The United States is not among them.

AstraZeneca is about to commence a trial of the drug with 5,000 participants. Another 1,100 participants in a second trial will evaluate AZD7442’s efficacy as a post-exposure prophylaxis and pre-emptive treatment. The company plans additional trials of the drug with 4,000 participants to determine the cocktail’s value as a treatment for COVID-19.

The HHS and Defense Department funding also will pay for 100,000 doses in 2020 of the single-shot AZD7442 vaccine that is expected to provide protection against COVID-19 for up to 12 months. The two agencies provided more than $25 million earlier this year to develop and begin trials of AstraZeneca’s monoclonal antibody treatments. The U.S. government also will be able to acquire an additional 1 million doses of AZD7442 in 2021 under a separate agreement.

Last May, the U.S. government agreed to pay $1.2 billion for 300 million doses of AZD1222, but lacking an FDA emergency use authorization, none can be shipped. That’s just $4 per dose. The per-dose average for the AZD7442 cocktail is $4,860 for the first 100,000 doses. Presumably, this would decline if the drug is approved and the federal government exercises its option to acquire another 1 million doses.

CEO Pascal Soriot commented that the U.S. government investment in AZD7442 in a medicine that “has the potential to provide immediate and long-lasting effect in both preventing and treating COVID-19 infections” focuses on “helping the most vulnerable people.”

AstraZeneca’s share price was up about 0.8% Monday morning, at $55.15 in a 52-week range of $36.15 to $64.94. The U.K.-based firm’s price target is $59.10, and the company pays a dividend yield of 2.56%.

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