After AstraZeneca invested two billion US dollars (£1.5 billion) in US pharmaceutical firm Summit Therapeutics to speed up the development of a cancer drug, Russ Mould, investment director at AJ Bell, believes it is a low-risk move.
He said: “AstraZeneca is constantly looking for ways to develop its pipeline of new drugs and to bring more effective treatments to market.
“The latest step forward is a $2 billion investment in Summit Therapeutics and a collaboration on developing gastrointestinal cancer treatments. In doing so, AstraZeneca provides important funding to Summit to accelerate its work.
“Taking a stake in a partner is common in the pharma and biotech space, with the larger party effectively getting a seat at the table and being in prime position for a potential buyout down the line.
“It is a lower-risk way of dipping the toe in the water. If the collaboration doesn’t yield the required results, then the larger party might just move on from the initial investment and not have wasted money from buying a company outright.
“This is also standard practice in other industries such as mining and oil and gas, where the larger party is interested in something but wants to dig deeper before fully committing.”
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