DUBLIN – Astrazeneca plc's small-molecule antibiotics business is hardly the jewel in its crown, but more than two years after Pfizer Inc.'s $116 billion cash-and-shares bid for the whole company ran into the ground, it is putting down $725 million and could pay up to $850 million more to gain ex-U.S. rights to an anti-infectives portfolio of three marketed and two development-stage assets.
New York-based Pfizer is paying $550 million up front and will pay another $175 million in January 2019 for development and commercialization rights in all ex-U.S. markets where London-based Astrazeneca holds rights. A further $250 million is linked to commercial, manufacturing and regulatory milestones, while up to $600 million more is available in sales-related payments. Astrazeneca would also receive double-digit royalties on sales of two of the drugs, Zavicefta and ATM-AVI, in certain markets.
The three approved drugs, Merrem (meropenem), Zinforo (ceftaroline fosamil) and Zavicefta (ceftazidime-avibactam) generated a combined $250 million in revenues in 2015. Zavicefta (formerly CAZ AVI), which gained European approval in June for treating serious gram negative bacterial infections, combines a third-generation cephalosporin with a beta lactamase inhibitor to protect against its breakdown. The same counter-resistance strategy has been applied to the two development-stage drugs included in the deal. ATM-AVI, which is in phase II development, is a fixed-dose combination of aztreonam and avibactam, while CXL, which has completed a phase II trial, combines Zinforo with avibactam.
FULL-ON BUYING MODE
In terms of scale, the deal is little more than a digestif for Pfizer following its successful $14 billion bid for San Francisco-based oncology firm Medivation Inc., earlier this week. In strategic terms, it represents further evidence that the big pharma is in full-on buying mode. If a single large-scale transaction is, for political reasons, beyond reach, Pfizer's appetite for multiple smaller-scale deals is still very much in evidence.
Since the U.S. Treasury scuppered its $160 billion tax-inversion-fueled bid for Dublin-based Allergan plc in April, Pfizer has entered commitments with a total potential value north of $21 billion.
In addition to this week's transactions, it paid $150 million up front for the outstanding equity of gene therapy developer Bamboo Therapeutics Inc., of Chapel Hill, N.C. – it already held a 22 percent stake in the firm – and it could pay up to $495 million more in milestones. In June, its $5.2 billion cash takeover of Anacor Pharmaceuticals Inc., of Palo Alto, Calif., closed, giving it ownership of a topical phosphodiesterase type 4 (PDE4) inhibitor, crisaborole, which is currently undergoing regulatory review as a treatment for atopic dermatitis.
The deal with Astrazeneca will bolster a portfolio that extends to more than 60 anti-infective and anti-fungal drugs. Its geographical scope is limited, however, as Allergan, ironically, holds North American rights to four of the five assets included in the deal, the sole exception being Merrem, a broad spectrum carbapenem indicated for hospital infections. Rights to Merren and Zinforo in certain Asian territories are held by various third parties. Pfizer will assign its new assets to its Essential Health business, which represented just under half – $6.042 billion – of its second quarter revenue of $13.147 billion. Whether this will be hived off from the Innovative Health business should become apparent in the coming months. Although each arm is currently pursuing an independent strategy, Pfizer does not plan to make a decision until year-end.
Excluded from the deal are the biologic development efforts underway at Astrazeneca's Medimmune arm – it is working on several antibodies against antibiotic-resistant bacteria – and Astrazeneca's stake in its Waltham, Mass.-based spinout Entasis Therapeutics, Inc., which took another batch of pipeline antibiotics with it last year. (See BioWorld Today, July 20, 2015.)
In fending off Pfizer's earlier advances, Astrazeneca has pursued a growth strategy based on six key drivers, including its respiratory franchise, diabetes, its Japan business, sales in emerging markets, new oncology products and sales of its platelet inhibitor Brilinta (ticagrelor). It set itself the difficult task of achieving $45 billion in annual revenue by 2023 – the first milestone on this growth path is to restore turnover in 2017 to 2013 levels. Turnover came in at $25.8 billion that year, before several patent expiries hit the topline. (See BioWorld Today, May 7, 2014.)
There is, at this point, little evidence that it will achieve that basic objective, as sales remain on a downward trajectory. Turnover fell to $24.7 billion in 2015 and reached just $11.7 billion during the first half of 2016. Key to its growth strategy is its PD-L1 inhibitor durvalumab.
Phase II monotherapy data in head and neck cancer are due before year-end. But its real potential will become more apparent during the first half of 2017. Phase III combination trials involving its CTLA-4 inhibitor tremelimumab, in both lung cancer and head and neck cancer, are due to read out then.