AstraZeneca plc (AZN - Free Report) announced an agreement to sell the U.S. rights of its pediatric lung infection medicine, Synagis to Swedish pharma company, Sobi for an upfront consideration of $1.5 billion plus further contingent payments.
About 130 AstraZeneca employees will also shift to Sobi as part of the transaction.
Shares of AstraZeneca were up almost 1.5% on Tuesday in response to the news. This year so far, AstraZeneca’s shares have risen 19.5% compared with the industry’s increase of 8%.
Synagis is indicated for the prevention of serious lower respiratory tract infection (LRTI) caused by respiratory syncytial virus (RSV), the most prevalent cause of LRTI among infants and young children.
In addition, the transaction gives rights to Sobi, officially, Swedish Orphan Biovitrum AB, to participate in the future U.S. profits and losses of AstraZeneca’s pipeline candidate, MEDI8897, which it is developing in collaboration with Sanofi’s (SNY vaccines unit, Sanofi Pasteur. MEDI8897 is a monoclonal antibody also being developed for the prevention of LRTI caused by RSV.
The upfront consideration comprises $1 billion in cash and $500 million in ordinary shares of Sobi, which equates to a stake of 8% in the company. AstraZeneca will get the stake when the transaction is completed.
In addition, AstraZeneca will also be eligible to receive $470 million in sales-related payments for Synagis and another $375 in milestone payments related to MEDI8897.
In 2018 so far, Synagis sales declined 9% to $414 million with sales in the U.S. declining 27%. AstraZeneca’s partner AbbVie, Inc. (ABBV - Free Report) markets Synagis in over 80 countries outside the United States. This collaboration will not be impacted by the proposed deal with Sobi.
The Synagis sale is the latest of the several divestiture deals announced this year by AstraZeneca as it streamlines its portfolio
Last week, AstraZeneca announced an agreement to divest ex-U.S. marketing and U.S royalty rights to three older respirator products to a Swiss pharmaceutical group, Covis Pharma. In late-October, AstraZeneca announced an agreement to divest European rights to its acid reflux medicine, Nexium and worldwide rights (excluding the United States and Japan) to arthritis pain reliever, Vimovo to Grünenthal.
In July, AstraZeneca sold its European rights to hypertension medicines Atacand and Atacand Plus to Cheplapharm Arzneimittel. In May, it announced an agreement to sell rights in the UK, China and other international markets to Seroquel and Seroquel XR, a treatment for schizophrenia and bipolar disease, to Luye Pharma Group.
The deals are part of the company’s strategy to manage its portfolio through divestments and allow AstraZeneca to focus on its core areas of Oncology, Cardiovascular, Renal & Metabolism and Respiratory.
AstraZeneca currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked pharma stock is Merck (MRK), a #2 Ranked (Buy) stock.
Merck’s earnings estimates have risen 1.4% for 2018 and 1.1% for 2019 over the past 30 days. The stock has gained 32.6% this year so far.
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