After a couple of years of bulking up through acquisitions, AstraZeneca (AZN) is now streamlining its business to focus on three key areas of medicine: respiratory, oncology and cardiovascular disease. The UK giant will sell its antibiotics business to acquisition-hungry Pfizer, which first came fishing for the whole of Astra back in 2014.
Settling for the antibiotics business, which comprises three approved drugs and two more in clinical development, seems to suit both groups well. Luke Miels, Astra’s European executive vice-president, said: “This agreement reinforces our strategic focus to invest in our three main therapy areas.”
Pfizer has a well-established infectious diseases business and the Astra portfolio will “enhance [its] global expertise” in an increasingly important area of medicine, according to group president John Young. Pfizer has already spent big this week having acquired cancer specialist Medivation for $14bn, a deal that values the company at a 120 per cent premium to the share price in March, before it was first approached for a takeover.
For Astra’s antibiotics, Pfizer will make an upfront payment of $550m, upon completion of the deal, with a further $175m due in January 2019 for commercialisation and development rights. Further payments for drug approvals, commercialisation and royalties could take the total expenditure up to $1.5bn.
The deal comes at a time when global governments are trying to increase pharmaceutical investment in antibiotics, amid concerns that a lack of new drugs in the past few decades has given rise to a wave of antibiotic-resistant superbugs. With antibiotics being a particularly unprofitable segment of the pharma market, large groups have avoided research and development.
However in the UK, proposals to incentivise antibiotic development could result in financial rewards to companies that succeed in launching a new drug, or penalties for those that are not engaged. Now, having sold its small-molecule antibiotics business it is unclear where Astra will stand should these incentives come to pass. The group has retained its portfolio of biological anti-infective drugs and its early-stage antibiotics development arm, which it formally made a standalone division last year.
