Back to top

Analyst Blog

AstraZeneca (AZN - Analyst Report) and Bristol-Myers Squibb Company (BMY - Analyst Report) announced that their type II diabetes drug, Farxiga, has been approved by the U.S. Food and Drug Administration (FDA).

The approval was in line with expectations as the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee (EMDAC) had rendered a positive recommendation on Farxiga.

Background

We however note that Farxiga’s path to approval has been far from smooth. In Jul 2011, the EMDAC had recommended against approving mainly due to safety concerns. Not surprisingly, the FDA issued a complete response letter (CRL) to AstraZeneca/Bristol-Myers in Jan 2012. While issuing the CRL, the U.S. regulatory body had asked for additional data to better assess Farxiga‘s risk-benefit profile. The agency said that the additional data may come from ongoing or new studies.

Following the receipt of the CRL, AstraZeneca/Bristol-Myers conducted several new studies on Farxiga. The companies not only included data from these studies in the resubmitted NDA but also provided additional long-term data (up to four years of duration) from earlier studies.

We note that the drug was approved in the EU in Nov 2012 and is marketed under the trade name Forxiga for treating type II diabetes.

AstraZeneca to Have Full Global Rights to Farxiga

AstraZeneca and Bristol-Myers recently signed an agreement under which the former will acquire the latter’s global diabetes business. The deal is expected to close this quarter. The pre-existing collaboration between the companies will be terminated and AstraZeneca will gain global rights to major diabetes products including Farxiga.

As per the latest deal, the approval of Farxiga triggers a $700 million payment from AstraZeneca to Bristol-Myers.

Our Take

We are pleased with the approval of Farxiga in the U.S. Now that AstraZeneca will acquire full rights to the drug, it stands to gain more. Generic competition has adversely impacted AstraZeneca's revenues over the past few quarters - this has put significant pressure on the company. In this context, the approval of Farxiga and the subsequent up-take of the drug will give a much needed boost to the company’s top line.

AstraZeneca carries a Zacks Rank #3 (Hold). Some better-ranked stocks include GlaxoSmithKline (GSK - Analyst Report) and Bayer (BAYRY - Analyst Report). Both carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
CENTURY ALU… CENX 22.53 +4.50%
ERBA DIAGNO… ERB 2.91 +4.30%
PLANAR SYST… PLNR 4.31 +3.86%
MALLINCKROD… MNK 72.17 +3.83%
GTT COMMUNI… GTT 12.06 +3.52%