AstraZeneca plc (AZN) recently announced that it has completed the acquisition of Ardea Biosciences, Inc. for approximately $1.26 billion or $32 per share. Both AstraZeneca and Ardea’s boards unanimously supported the merger. Ardea’s stockholders also approved the deal.
This acquisition added lesinurad, which is being developed as a chronic treatment of gout, to AstraZeneca’s pipeline. The US and EU regulatory filings for lesinurad are planned for the first half of 2014. AstraZeneca also gained oncology candidate, BAY 86-9766 and another gout candidate, RDEA3170 through the acquisition. We note that the erstwhile Ardea Biosciences co-developed BAY 86-9766 with the HealthCare unit of Bayer (BAYRY).
On approval, the gout candidates will target a highly lucrative market. We note that the incidence and severity of gout is increasing in the US. The market has a huge unmet need with Takeda Pharmaceutical’s (TKPYY) Uloric (febuxostat) and allopurinol being two widely-prescribed therapies (xanthine oxidase inhibitors) for the treatment of gout patients. The inhibitors reduce the production of uric acid in the body.
However, the effectiveness of xanthine oxidase inhibitors is limited since only approximately 10% of patients affected by gout are over-excretors of uric acid. Many gout patients fail to respond favorably to these therapies. This should provide lesinurad, which is being evaluated both as an add-on and monotherapy, and RDEA3170 the opportunity to capture the gout market share.
Neutral on AstraZeneca
We are encouraged by AstraZeneca’s focus on high-potential emerging markets and are pleased with its effort to drive the bottom line through cost-cutting initiatives and share buybacks.
However, we remain concerned about the generic competition faced by the company’s key products. In 2011, the company lost revenues worth almost $2 billion to generic competition. The weak late-stage pipeline coupled with the slow Brilinta uptake also bothers us. We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run.
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