Print | Share | Reprint

Pfizer, AstraZeneca in strategic deal

by Ben Fidler | Published August 15, 2012 at 4:33 PM

Pfizer Inc. has made a $250 million move to bolster its consumer healthcare division through an agreement with AstraZeneca plc that could serve as a harbinger of a larger relationship between the two mammoth drugmakers. The deal with Britain's AstraZeneca is to sell an over-the-counter version of the latter's blockbuster gastroesophageal reflux disease pill Nexium. Through the deal, Pfizer has acquired the global rights to market OTC in the U.S., Europe and the rest of the world for a $250 million up-front payment to AstraZeneca and additional milestone and royalty payments based on product launches and sales.

Pfizer aims to begin selling OTC Nexium in the U.S. in 2014 -- the year the drug loses patent protection -- with international markets following thereafter.

Pfizer and AstraZeneca indicated that the deal could portend a much larger collaboration. Both are exploring a strategic partnership that "could include similar agreements" for OTC versions of some of AstraZeneca's prescription brands. Pfizer has already been given a right of first refusal for OTC rights to AstraZeneca's prescription nasal spray Rhinocort Aqua, which delivered $212 million in sales in 2011.

Nexium, meanwhile, brought in $4.5 billion in 2011 for AstraZeneca, but it is one of a group of the company's top-selling drugs to lose patent protection over the next few years. Others include cholesterol drug Crestor ($6.62 billion in 2011, patent expiry in 2014) and antipsychotic Seroquel ($5.8 billion in 2011, patent expired in March), leading to significant pressure on the British drugmaker to cut deals to bolster its pipeline and offset the revenue losses. AstraZeneca has made a few deals over the past several months to help turn the tide, most notably joining with Bristol-Myers Squibb Co. to take control of diabetes treatment producer Amylin Pharmaceuticals Inc. in a $7 billion buyout, but analysts still believe it must do more.

"We still believe that AstraZeneca needs to remedy its late-stage pipeline issues," wrote Navid Malik, an analyst at Cenkos Securities plc in London, in a research note. "Outside of the deal with [Bristol] on Amylin, we have not seen evidence yet of how AstraZeneca will offset the significant patent exposure it faces."

AstraZeneca's former CEO, David Brennan, resigned in March. The drugmaker is still searching for a new CEO.

As for Pfizer, the partnership suggests the drugmaker is intent on beefing up its consumer healthcare business, a division that some analysts have theorized will ultimately be shed as the company continues remaking itself into a pure-play pharmaceutical company. The Nexium deal is the second strategic move Pfizer has made this week. On Monday, it filed a registration statement with the Securities and Exchange Commission outlining the initial public offering of up to 20% worth of Class A common stock in its animal health unit, Zoetis Inc. Pfizer hasn't yet determined the number of shares to be issued or the price range of the offering. Zoetis produces treatments (vaccines, parasiticides and anti-infectives) for diseases in livestock and pets. The unit brought in $4.2 billion in revenue in 2011 and has products in more than 120 countries in major geographic regions such as North America, Europe, Africa, the Middle East, Latin America and Asia-Pacific, selling to veterinarians, livestock producers and animal owners.

Pfizer has said that it hopes to complete the IPO during the first half of 2013.

JPMorgan Chase & Co., Bank of America Merrill Lynch and Morgan Stanley will be the joint bookrunning managers for the IPO.

Share:

Tags: AstraZeneca plc | Nexium | Pfizer Inc. | pharmaceuticals

Healthcare

Pfizer, AstraZeneca in strategic deal

Free preview

Meet the journalists

Ben Fidler

Senior Reporter, Healthcare, Pharmaceuticals & Biotechnology

Movers & Shakers

Video

PE sponsors choose IPOs as market rises

Sectors