Committed seller could give Pfizer an antibiotic bargain

AstraZeneca’s latest dump-off has allowed Pfizer to pick up a bargain in ex-US rights to five novel antibiotics, though sales could struggle to reach forecast levels if the drugs are reserved for emergencies, which might especially be the case in the EU.

An analysis of sellside consensus forecasts in EvaluatePharma shows Pfizer to be paying a fair price for two marketed drugs, with a third, Zavicefta, representing a possible windfall (see table below). Still, if Astra has let these go cheap, the outcome is reasonable for a portfolio it had been hawking around for some time.

It was a couple of years ago that the UK firm accelerated its “externalisation” plan to focus on oncology, respiratory disease and diabetes, and ditch the rest. This has seen Movantik sold to Daiichi Sankyo and dermatologicals to Leo Pharma, and antibiotics were seen as ripe for divestment (Movantik the first to disappear from Astra’s sale table, March 19, 2015).

Getting out

Astra wanting out of the antibiotics portfolio made it a committed seller, likely explaining the bargain price at which Pfizer has picked this up: effectively $725m up front, $250m in development milestones, plus sales-related milestones and royalties.

The deal comprises ex-US rights to five small-molecule antibiotics: Merrem, an off-patent drug with declining sales; Zinforo, launched in October 2012; Zavicefta/Avycaz, recently approved in the EU; and the phase II combination projects ATM-AVI and CXL/CEF104.

EvaluatePharma carries sellside forecasts for all of these apart from ATM-AVI, and their combined net present value – $1.7bn – shows the bargain that Pfizer is getting. The result might be skewed by including global sales of Merrem, but since the US patent of this drug expired in 2010 its US sales have fallen to single-digit millions of dollars, according to EvaluatePharma’s USA Sales, Volume & Price data.

Valuing AstraZeneca's ex-US antibiotics portfolio
2015 sales 2022e sales NPV Note
Merrem $241m $108m $655m Includes US, where sales are negligible (lost patent in 2010).
Zinforo $106m $203m $347m Excludes US, where Allergan separately holds rights.
Zavicefta 0 $198m $709m Excludes US, where Allergan separately holds rights.
ATM-AVI 0 none none No sellside forecasts.
CEF104 0 $7m $24m Excludes US, where Allergan separately holds rights.
Source: EvaluatePharma.

Of course, Pfizer stands to pay Astra sales-based milestones and double-digit royalties on sales of Zavicefta and ATM-AVI, which could help bridge the valuation gap. On the other hand, a strong, committed marketer like Pfizer might be able to extract greater revenues than Astra.

Against this stands the broader issue of just how many patients might be given these products. The antibiotic resistance problem is growing, and given the focus that this crisis has come under of late it might be that novel antibiotics will be strictly rationed for patients who really have exhausted most other avenues of treatment.

Be that as it may, deal bankers will take heart that just two days after buying Medivation at a knockout price Pfizer has done another small acquisition. With a pipeline hole still to fill, they can rest assured of more to come.

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobPlieth on Twitter

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