AstraZeneca
(
AZN
) recently announced that it has entered into a global exclusive
licensing agreement with Ardelyx for the latter'sNHE3 inhibitors.
The deal includes Ardelyx's lead candidate, RDX5791, an orally
administered NHE3 sodium transport inhibitor. RDX5791 is being
developed for constipation-predominant irritable bowel
syndrome/IBS-C (phase II) and the prevention of sodium overload in
patients with end-stage renal disease (ESRD), chronic kidney
disease (CKD) and heart disease (completed phase I).
As per the terms of the agreement, AstraZeneca will make an upfront
payment of $35 million and milestone payments of $237.5 million, on
the achievement of launch and commercialization targets, to
Ardelyx. Additionally, AstraZeneca will pay tiered double-digit
royalties on net sales of the candidates developed under the
collaboration.
While Ardelyx will conduct the phase II trials, AstraZeneca will
bear the subsequent development costs. Meanwhile, Ardelyx also has
an option to co-promote RDX5791 in the US, subject to certain
pre-specified conditions.
Apart from the licensing agreement, AstraZeneca was also in the
news recently when it suspended its share repurchase program. The
company has repurchased shares worth $2.3 billion during 2012. The
company was targeting net share repurchases of $4.5 billion in
2012. The termination of the share repurchase program will not
affect the 2012 earnings guidance of $6.00 - $6.30 per share.
This step was taken by the new Chief Executive Officer (CEO) Pascal
Soriot, who joined AstraZeneca in August 2012 from
Roche Holdings Ltd.
(
RHHBY
) to maintain flexibility while he reviews AstraZeneca's annual
strategy.
Our Recommendation
We are encouraged by AstraZeneca's focus on the high-potential
emerging markets. We are pleased with its efforts to expand its
pipeline and portfolio through mergers and acquisitions.
The Ardelyx agreement, Ardea acquisition, the
Amgen
(
AMGN
) collaboration and the expansion of the diabetes alliance with
Bristol-Myers Squibb
(
BMY
), all represent the company's efforts in this direction. We expect
more such deals in the near term.
However, we remain concerned about the generic competition faced by
the company's key products. In 2011, the company lost revenues
worth almost $2 billion to generic competition. The weak late-stage
pipeline at AstraZeneca coupled with slow Brilinta uptake also
bothers us.
We currently have a Neutral recommendation on AstraZeneca. The
stock carries a Zacks #3 Rank (Hold rating) in the short run.
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