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AstraZeneca to Buy Omthera Pharma

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Recently, AstraZeneca (AZN - Free Report) entered into a definitive agreement to purchase US based specialty pharmaceutical company, Omthera Pharmaceuticals for approximately $323 million or $12.70 per share. The offer price represents a premium of 88% on Omthera Pharma’s closing price on May 24, 2013. The transaction is expected to close by the third quarter of 2013 subject to regulatory approvals.

We note that the acquisition of Omthera Pharma will add a promising cardiovascular candidate, Epanova to AstraZeneca’s pipeline. Last year, encouraging efficacy data on Epanova from two phase III trials (EVOLVE and ESPRIT), conducted under the US Food and Drug Administration’s Special Protocol Assessment, were released.

It was found that Epanova lowered very high triglycerides and reduced non-high-density lipoprotein (HDL) cholesterol as an adjunct to a statin in patients with high triglycerides.

Omthera Pharma is expected to submit a marketing application for Epanova for severe hypertriglyceridemia in the US in mid-2013. AstraZeneca has high hopes from the candidate and targets to seek approval for Epanova in the mixed dyslipidemia indication as soon as possible.

AstraZeneca also intends to get Epanova approved as a fixed dose combination with its cardiovascular drug, Crestor for mixed dyslipidemia patients with high risk of cardiovascular events. Moreover, AstraZeneca is planning to conduct a large scale cardiovascular outcomes trial to assess Epanova in combination with statins.

We note Omthera Pharma shareholders will get contingent value rights of up to approximately $120 million, subject to the achievement of Epanova milestones. Omthera Pharma’s stock price more than doubled on the news.
Our Take

We are pleased with AstraZeneca’s efforts to bolster its pipeline and believe that the Omthera Pharma deal makes strategic sense. It marks AstraZeneca’s second acquisition this year in the cardiovascular field, after AlphaCore Pharma, in Apr 2013.

AstraZeneca’s pipeline is currently under severe pressure with revenues plunging due to generic competition faced by several key drugs including Seroquel. The company will face additional pressure once Nexium (2014) and Crestor (2016) start facing generics.

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

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