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AstraZeneca (AZN - Analyst Report) recently announced that MedImmune (the biologics research and development arm of AstraZeneca) has entered into an agreement with privately-held US-based company, NGM Biopharmaceuticals, Inc. for discovery, development and commercialization of candidates from NGM Biopharma’s enteroendocrine cell (EEC) program. Together, the companies will develop candidates for type II diabetes and obesity.

As per the terms of the agreement, NGM Biopharma will receive an upfront payment and will be eligible to receive milestone payments subject to achievement of certain development, regulatory and commercial targets from AstraZeneca. AstraZeneca will also provide research funding and pay royalties on net sales of the products arising from this agreement.

We note generic competition has adversely impacted AstraZeneca’s revenues over the past few quarters. This has put significant pressure on the company. AstraZeneca is looking to combat generic erosion faced by many of its key drugs by signing deals, making acquisitions and developing new products.

Its agreements with Karolinska Institutet (to conduct preclinical and clinical trials for candidates targeting cardiovascular and metabolic diseases), Moderna Therapeutics (to develop RNA therapeutics for the treatment of serious cardiovascular, metabolic and renal diseases and cancer) and BIND Therapeutics (for development and commercialization cancer nanomedicine) are efforts in that direction.

AstraZeneca entered into a number acquisition deals including Pearl Therapeutics, Omthera Pharmaceuticals, Inc. and AlphaCore Pharma in the last few months.

AstraZeneca carries a Zacks Rank #3 (Hold). Currently, companies like Santarus, Inc. and Salix Pharmaceuticals (SLXP - Analyst Report) look more attractive with a Zacks Rank #1 (Strong Buy).

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