AstraZeneca, Sanofi swap 210,000 compounds in no-cash deal

AstraZeneca ($AZN) and Sanofi ($SNY) have exchanged 210,000 compounds from their respective libraries in a no-cash, no-strings-attached deal. The agreement gives scientists at both companies free rein to research and develop compounds shared by the other, without having to pay fees or steer clear of certain therapeutic areas.

AstraZeneca Executive Vice President Mene Pangalos

Both companies will perform high-throughput screening on the new additions to their compound libraries. AstraZeneca thinks it is gaining enough compounds to keep its screening team busy for several years. And if any of the compounds show promise against any target--regardless of whether it is an indication in which AstraZeneca and Sanofi compete--the companies can tweak and advance the drug without paying any licensing fees or royalties. The deal is in essence a bet that compound libraries, while important, aren't what defines whether a drug developer succeeds or fails.

"I'm competing with Sanofi on how good my biologists and scientists are," Mene Pangalos, head of early-stage development at AstraZeneca, told The Wall Street Journal. "The compound collection is a means to an end." When viewed from this perspective, the swap is a pragmatic decision. Pangalos said it would cost $250 million to develop the compounds obtained in the deal internally. And $50 million to buy them in from another developer. The Sanofi deal therefore represents a cheap and fast way to boost the size of its compound library.

The scale and identity of the participants in the AstraZeneca-Sanofi deal make it noteworthy, but it is part of an ongoing shift in the definition of what is pre-competitive. In the past, compound libraries were typically closely guarded by Big Pharma companies, which saw the assets they contained as a key enabler of their future pipeline success. But in recent years, some companies have shown a growing willingness to open up their compound libraries to rivals. Bayer and AstraZeneca started sharing their compound libraries in 2011, although license fees are involved. And a who's who of Big Pharma firms have pooled compounds under a project initiated by the National Institutes of Health.

Pangalos sees such deals as effectively risk-free, in part because in his view even if two R&D shops start with the same compound and target, the chances of them creating the same drug are "next to zero." In this view of R&D, what you do with a compound matters far more than the starting material itself. While this outlook is increasingly accepted, some people see things differently. "Not everyone has the same philosophy and approach that we do," Pangalos said. These philosophical differences have resulted in talks between AstraZeneca and other Big Pharma firms falling apart.

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