AstraZeneca Invests in China, To Buy Respiratory Business

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AstraZeneca plcAZN , along with its global biologics research and development arm MedImmune, has unveiled a range of strategic initiatives to expand its footprint in China. The company also announced that it will be acquiring the respiratory business of Takeda Pharmaceutical Company Limited TKPYY .

Partnership Expanded with WuXi in China

AstraZeneca has struck a deal with WuXi AppTec, an operating subsidiary of China-based WuXi PharmaTech Inc., to develop innovative biologics targeting therapeutics areas such as respiratory, inflammation and autoimmunity, cardiovascular and metabolic diseases, and oncology. The agreement gives AstraZeneca the option to gain rights to WuXi AppTec's biologics manufacturing capacity in Wuxi City over the next few years through an investment of around $100 million. Meanwhile, Wuxi AppTec remains the company's exclusive partner for R&D manufacturing of innovative biologics in China.

The latest agreement expands the tie between the two companies. In 2012, the companies had entered into a deal for the development and commercialization of MEDI5117, a novel biologic for the treatment of autoimmune and inflammatory diseases, in China.

AstraZeneca also plans to spend $50 million to set up an additional development and launch facility alongside its existing manufacturing site in Wuxi City to aid the development and manufacturing of innovative small molecules discovered in China and at its global R&D sites.

The company's additional investments include the creation of a new global hub for pharmaceutical development next to those in the UK and Sweden, and hiring up to 50 scientists based in Shanghai and Wuxi City, to meet both its Chinese and global needs. AstraZeneca is also creating an integrated China medicines development organization for the development of early- and late-stage medicines across small molecules and biologics.

Given that China is AstraZeneca's second-largest market globally and a key growth platform, we are positive on the deal. In fact, the country accounted for almost 11% of AstraZeneca's total revenue in the first nine months of 2015.

To Buy Respiratory Business from Takeda

AstraZeneca announced that it has entered into a definitive agreement with Takeda to buy the latter's core respiratory business. The deal, which gives AstraZeneca global rights to roflumilast (U.S. trade name: Daliresp; outside the U.S.: Daxas) will see the company shelling out $575 million to Takeda. AstraZeneca will also get access to other marketed respiratory medicines and early pipeline products. Moreover, the deal includes the transfer of about 200 of Takeda's employees to AstraZeneca.

We note that Daliresp/Daxas is the only oral PDE4 inhibitor approved for the treatment of chronic obstructive pulmonary disease. AstraZeneca has been marketing Daliresp in the U.S. since it gained rights to the drug from Allergan plc AGN in the first quarter of 2015.

The agreement is slated to close in the first quarter of 2016 and will be immediately accretive to earnings. With AstraZeneca gaining global rights to Daliresp, it will negate the company's existing royalty payments for the drug in the U.S. The company intends to provide its guidance for 2016 when it reports 2015 results on Feb 4, 2016.

The respiratory portfolio is one of the key growth platforms of the company which has been working on strengthening the same. While the company acquired rights to Allergan's branded respiratory business in the U.S. and Canada earlier this year, last year, it had purchased Almirall's respiratory franchise.

AstraZeneca is a Zacks Rank #3 (Hold) stock. Achillion Pharmaceuticals, Inc. ACHN is a better-ranked stock in the health care sector with a Zacks Rank #1 (Strong Buy).

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ASTRAZENECA PLC (AZN): Free Stock Analysis Report

ALLERGAN PLC (AGN): Free Stock Analysis Report

TAKEDA PHARMACT (TKPYY): Free Stock Analysis Report

ACHILLION PHARM (ACHN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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