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Actavis to Divest Respiratory Business to AstraZeneca

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Actavis plc (ACT - Free Report) entered into an agreement with AstraZeneca plc (AZN - Free Report) under which the latter will acquire rights to Actavis’ branded respiratory business in the U.S. and Canada.

Terms of the Deal

Actavis will receive $600 million on completion of the deal along with low single-digit royalties above a certain revenue threshold from AstraZeneca.

Actavis will get an additional $100 million having agreed to certain contractual consents and approvals, including amendments to ongoing collaboration agreements between the companies. The deal is expected to close this quarter.

AstraZeneca to Boost Respiratory Portfolio Through Deal

Once the deal goes through, U.S. and Canada development and commercial rights to two drugs (Tudorza Pressair and Daliresp), both for the treatment of chronic obstructive pulmonary disease (COPD), will be owned by AstraZeneca. Combined annual U.S. sales of these products were about $230 million in 2014.  

AstraZeneca will also gain development rights in the U.S. and Canada for LAS40464, also for COPD.  LAS40464 is already approved in the EU under the name Duaklir Genuair.

Actavis to Focus on Core Areas

Meanwhile, with the divestment of these products, Actavis will be able to focus on its core therapeutic categories like central nervous system, women's health, urology, gastrointestinal, anti-infectives and cardiovascular, as well as dermatology/aesthetics and ophthalmology, which will become a part of the company’s global brand portfolio once the Allergan Inc. (AGN - Free Report) acquisition goes through later this year.

Our Take

We are positive on Actavis’ efforts to focus on core strategic therapeutic areas. The company has been working on strengthening its branded product portfolio, and completed quite a few acquisitions over the last few quarters.

Actavis carries a Zacks Rank #2 (Buy). A better-ranked stock in the health care sector is Impax Laboratories , sporting a Zacks Rank #1 (Strong Buy).

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