AstraZeneca buys Almirall lung drugs for up to $2.1 billion

By Ben Hirschler

LONDON (Reuters) – AstraZeneca took a major step to build up its respiratory medicine business on Wednesday by striking a deal worth up to $2.1 billion (1.24 billion pounds) for the rights to Spanish group Almirall’s lung drugs.

The British drugmaker, which resisted a $118 billion takeover attempt by Pfizer in May, said it would pay an initial $875 million and up to $1.22 billion more if the drugs meet development and sales targets.

The tie-up boosts a key therapeutic area for AstraZeneca, whose Chief Executive Pascal Soriot is determined to show his company has a strong independent future.

Soriot also struck a clinical trial collaboration with Japan’s Kyowa Hakko Kirin <4151.T> for a study that will evaluate a combination of the two companies’ drugs in cancer – another important field for AstraZeneca.

For Almirall, the deal with AstraZeneca is a notable win that will give it extra resources to increase its focus on dermatology. The company is a local success story whose shares have strongly outperformed the Spanish market in the past three years.

AstraZeneca will have the right to develop and commercialise Almirall’s existing lung drugs – including its recently launched treatment Eklira or aclidinium – as well as its pipeline of experimental therapies.

Almirall Sofotec, an Almirall subsidiary focussed on the development of devices for delivering respiratory drugs, will also transfer to AstraZeneca.

Importantly, the deal gives AstraZeneca access to revenues from a drug already on the market, in Eklira, helping its sales immediately as it struggles with a wave of patent expiries on its own blockbuster medicines.

The company expects the transaction, which will be paid for from existing cash reserves and using short-term credit facilities, to be neutral to core earnings per share in 2015 and accretive from 2016. It will not affect the company’s financial outlook for 2014.

SMART DEAL

Mick Cooper, an analyst at Edison Investment Research, said the agreement with Almirall was a “smart deal” that would help build up AstraZeneca’s respiratory business, which is already doing well as its Symbicort drug wins business from GlaxoSmithKline’s Advair.

“Its respiratory franchise has considerable momentum at the moment and this agreement fills in the gaps in the portfolio,” he said.

Almirall said the deal would boost its earnings immediately and shares in the Barcelona-based group, which was advised by Rothschild, jumped 8 percent by 0740 GMT (8.40 a.m. BST) on news of the windfall.

Analysts at Jefferies said AstraZeneca’s decision to buy the entire respiratory franchise wiped out concerns about Almirall’s so-called LAMA/LABA lung drug combination in the United States, where regulators have asked for more clinical trial data.

AstraZeneca shares were 1 percent higher, outperforming a 0.3 percent gain in the European drugs sector <.SXDP>.

“By combining our innovative portfolios and leveraging AstraZeneca’s global scientific and commercial capabilities, we will strengthen our ability to address the entire spectrum of care in asthma and COPD (chronic obstructive pulmonary disease),” Soriot said in a statement.

The two companies said a “significant” number of Almirall employees in its respiratory business would transfer to AstraZeneca.

AstraZeneca will report second-quarter results on Thursday, when it will seek to prove its financial resilience after its decision to reject Pfizer’s takeover advances.

U.S.-based Pfizer on Tuesday left investors guessing whether it would renew its pursuit of its British rival, as it presented quarterly results, but said it was still considering big deals.

(Editing by Tom Pfeiffer and Jane Merriman)

AstraZeneca buys Almirall lung drugs for up to $2.1 billion