) recently entered into an agreement with
) for the marketing of an over-the-counter (OTC) version of
AstraZeneca's Nexium, which is approved for the treatment of the
symptoms of gastroesophageal reflux disease (GERD).
Per the terms of the agreement, AstraZeneca will receive an
upfront payment of $250 million from Pfizer along with milestone
and royalty payments on product launches and sales. In return,
Pfizer will gain exclusive rights to market OTC Nexium in the US,
Europe and the rest of the world.
While AstraZeneca will continue marketing the prescription
product, it will supply the OTC product to Pfizer. The OTC version
of Nexium (20mg) has been filed for approval in the EU (June 2012).
Meanwhile, a regulatory application for the approval of OTC Nexium
in the US is slated for the first half of 2013. Pfizer could be in
a position to launch the product in the US as early as 2014,
provided it gains approval.
Pfizer and AstraZeneca are also looking to sign similar
agreements for other prescription products which could be launched
over-the-counter. In fact, AstraZeneca has granted Pfizer a right
of first refusal for OTC rights to Rhinocort Aqua, which is
approved for the treatment of non-infectious rhinitis (such as hay
fever and house dust mite allergy).
With the signing of the OTC Nexium deal, Pfizer and AstraZeneca
tweaked certain parts of their guidance for 2012. While Pfizer cut
its 2012 earnings guidance by a couple of cents, AstraZeneca raised
its 2012 earnings guidance by 16 cents.
Pfizer now expects earnings in the range of $2.12 - $2.22 per
share. The company raised its R&D guidance to $6.75 - $7.25
billion from $6.5 - $7.0 billion. The Zacks Consensus Estimate for
2012 currently stands at $2.20 per share.
Meanwhile, AstraZeneca said that it will recognize the $250
million upfront payment as other income. As a result, the company
now expects core earnings per share in the range of $6.00 - $6.30,
up 16 cents from the previous guidance. The Zacks Consensus
Estimate for 2012 currently stands at $6.00 per share.
We view this agreement as beneficial for both Pfizer and
AstraZeneca. While the deal will boost Pfizer's consumer health
segment sales once OTC Nexium is launched, the launch of OTC Nexium
will ensure that AstraZeneca continues generating revenues from
Nexium even after its genericization. Moreover, the deal is
immediately accretive for AstraZeneca. Nexium sales came in at $4.4
billion in 2011.
We currently have a Neutral recommendation on both Pfizer and
AstraZeneca. Both stocks carry a Zacks #3 Rank (short-term 'Hold'
ASTRAZENECA PLC (AZN): Free Stock Analysis
PFIZER INC (PFE): Free Stock Analysis Report
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