Pfizer Buys Part of AstraZeneca's Antibiotics Business -- 2nd Update

By Denise Roland 

LONDON-- Pfizer Inc. has agreed to buy part of AstraZeneca PLC's antibiotics business for up to $1.575 billion plus royalties in a move the U.S. company said would boost the stable of older products it sells, some of which have lost patent protection.

Under the terms of the deal Pfizer will pay Astra $550 million upfront plus an unconditional $175 million in January 2019. Then, depending on the progress and commercial success of the drugs in question, it will pay a further $850 million plus royalties.

The deal involves three approved antibiotics and two drugs in clinical trials. It will give Pfizer the right to sell those drugs in most markets outside the U.S. and Canada.

Allergan PLC holds the North American rights to four of the drugs. For the fifth drug, Merem, Pfizer will get the North American rights.

It doesn't involve Astra's portfolio of biological anti-infective drugs, or the business it spun out last year to focus on the development of early-stage antibiotics.

Pfizer said the drugs would add to its "essential health" business, which sells older products including those that have lost patent protection. The U.S. company already has a portfolio of more than 60 anti-infective and antifungal medicines, said John Young, who heads that unit.

Luke Miels, executive Vice President for Europe and head of antibiotics at Astra, said in Pfizer's hands the drugs would "reach greater numbers of patients around the world."

The U.S. drugmaker was one of several pharmaceutical companies to exit antibiotic research and development in recent years, though it continues to sell older products.

The pharmaceutical industry has largely turned away from antibiotic research due to the low likelihood of getting a return on investment. Any new class of antibiotics would need to be used sparingly to conserve their effectiveness, meaning sales would be slow.

Governments around the world are now looking for ways to encourage large companies to come back into the space to help address a global rise in antimicrobial resistance.

The deal with Pfizer forms part of Astra's "externalization" strategy: offloading drugs that don't fall into its core therapy areas of cardiovascular and metabolic disease, oncology, and respiratory, inflammation and autoimmunity.

Normally these deals boost Astra's top line, but in this case the proceeds will be reported under operating income. The company said that was because Astra won't retain a significant long-term interest or stake in the future development of the business.

Write to Denise Roland at [e-mail]

(END) Dow Jones Newswires

August 24, 2016 05:33 ET (09:33 GMT)

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