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AstraZeneca (AZN - Analyst Report) announced that it has entered into an agreement with UK-based Synairgen to in-license its respiratory disease candidate, SNG001. SNG001 is being developed for the treatment of respiratory tract viral infections in patients suffering from severe asthma.

AstraZeneca plans to initiate a phase IIa study on SNG001 in patients with severe asthma in early 2015. Currently, data from an initial phase lla trial in a broad asthma population is available. In the future, AstraZeneca may also develop SNG001 for other pulmonary indications including chronic obstructive pulmonary disease.

Terms of the Deal

As per the terms of the deal, AstraZeneca will make an upfront payment of $7.25 million to Synairgen. AstraZeneca will also be obligated to pay milestone payments of up to $225 million on the achievement of development, regulatory and commercial targets. Apart from this, Synairgen will receive tiered royalties in the band of single-digit to mid-teens on net sales of SNG001. Future development costs will be funded by AstraZeneca.

This deal is in line with AstraZeneca’s plan to boost its respiratory disease pipeline which already includes candidates like benralizumab, which is being developed for the treatment of severe uncontrolled asthma. The company expects benralizumab to generate peak sales of $2 billion. AstraZeneca also has experience in marketing several products like Symbicort and Pulmicort in this area, which should prove beneficial if and when SNG001 receives approval.

AstraZeneca carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Gilead Sciences Inc. (GILD - Analyst Report), Allergan (AGN - Analyst Report) and Alexion Pharmaceuticals, Inc. (ALXN - Analyst Report). While Gilead and Allergan are Zacks Rank #1 (Strong Buy) stocks, Alexion holds a Zacks Rank #2 (Buy).

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