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AstraZeneca (AZN - Analyst Report) recently entered into a collaboration with Cambridge-based, privately-held Moderna Therapeutics for the discovery, development and commercialization of messenger RNA therapeutics. The companies will develop messenger RNA therapeutics for the treatment of serious cardiovascular, metabolic and renal diseases and cancer.

As per the terms of the agreement, Moderna is entitled to receive an upfront payment of $240 million from AstraZeneca. Additionally, Moderna will receive potential technical milestone payments of $180 million.

In exchange, for up to five years, AstraZeneca has the exclusive right to choose any cardiometabolic disease target and selected oncology targets for the development of messenger RNA.

The company possesses an option to select up to 40 candidates under the agreement and will be responsible for their development (preclinical and clinical) and commercialization.

Moderna Therapeutics will design and manufacture the messenger RNA against targets selected by AstraZeneca. AstraZeneca will be obligated to pay milestone payments on the achievement of development and commercialization targets. The company will also make royalty payments (high single digits to low double digits) on net sales of the products developed under the collaboration.

Meanwhile, AstraZeneca recently announced its plans to create an integrated translational research centre in collaboration with Sweden-based medical university Karolinska Institutet. The research center will be located at Karolinska Institutet’s site in Stockholm, Sweden and is expected to be functional by mid-2013.

The research center will conduct preclinical and clinical trials for candidates targeting cardiovascular and metabolic diseases. The center will work on the evaluation of candidates for AstraZeneca’s biotech units (AstraZeneca Innovative Medicines and Early Development and MedImmune).

We note that AstraZeneca is overhauling its research and development operations. Just a few days back, it announced its plans to initiate strategic reforms in its research and development (R&D) segment.

We believe that the collaborations along with the restructuring initiative reflect AstraZeneca’s efforts to cut down on cost while maintaining its focus on R&D. AstraZeneca, through these initiatives, is looking to combat the generic competition faced by the company. Generic competition has adversely impacted AstraZeneca’s revenues over the past few quarters. Moreover, the company is slated to face generic erosion for products including Nexium and Crestor in next few years.

AstraZeneca carries a Zacks Rank #3 (Hold). However, other large cap pharma stocks such as Novo Nordisk (NVO - Analyst Report) and Eli Lilly and Company (LLY - Analyst Report) currently look more attractive with a Zacks Rank #2 (Buy). Another pharma stock that looks attractive is Qlt Inc. (QLTI - Analyst Report). Qlt Inc. is a Zacks Rank #1 (Strong Buy) stock.

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