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Pfizer to Acquire Rights to AstraZeneca's Antibiotics Business

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Pfizer Inc. PFE announced that it has entered into an agreement to acquire the rights to AstraZeneca plc’s (AZN - Free Report) late-stage small-molecule anti-infectives business, primarily in the ex-U.S. markets.

The transaction will give Pfizer the rights to Zavicefta, which gained approval in the EU in Jun 2016, for complicated urinary tract infections (cUTI), complicated intra-abdominal infections (cIAI), hospital-acquired pneumonia/ventilator-associated pneumonia (HAP/VAP), and for the treatment of aerobic gram-negative infections in adult patients with limited treatment options.

The portfolio also includes marketed agents, Merrem/Meronem and Zinforo; and pipeline candidates, ATM-AVI and CXL.

Under the terms of the agreement, AstraZeneca will receive an upfront payment of $550 million from Pfizer upon the closing of the transaction. Pfizer will also make a deferred payment of $175 million in Jan 2019. Moreover, AstraZeneca is eligible to receive up to $250 million in milestone payments, and up to $600 million in sales-related payments from Pfizer. In addition, AstraZeneca will earn tiered royalties on sales of Zavicefta and ATM-AVI in certain markets.

The transaction is slated to close in the fourth quarter of 2016.

We note that acquiring the rights to AstraZeneca’s antibiotics business will help Pfizer focus on infectious diseases and gain expertise in this space. It will also help the company expand patient access and enhance the global capability of its anti infectives portfolio. However, Pfizer said that the transaction will not impact its financial guidance for 2016.

AstraZeneca, on the other hand, will now be able to concentrate on its three main therapeutic areas – respiratory & autoimmunity, cardiovascular & metabolic diseases, and oncology, backed by a strong portfolio of established products and a deep pipeline.

Currently, both Pfizer and AstraZeneca carry a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the health care sector include Actelion Ltd. ALIOF and ANI Pharmaceuticals, Inc. ANIP. Both the stocks sport a Zacks Rank #1 (Strong Buy).

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