Astra’s bargain basement move sends competition a message

In the aftermath of Pfizer’s failure to buy AstraZeneca the UK company can hardly have been expected to take its foot off the deal-making pedal, but the timing of today’s respiratory products purchase from Almirall almost has a touch of vindictiveness.

The move came a day after Pfizer fielded questions about its M&A plans, and a week after GlaxoSmithKline revealed deep problems with its own respiratory franchise. True, the Almirall portfolio was never going to be a world leader, but through it Astra buys multiple shots on goal at a price that will not break the bank (see table below).

Indeed, the $875m Astra is initially paying Almirall is not all that much more than the $560m it handed over up front last year to buy Pearl Therapeutics – a much earlier-stage business. And among the UK firm’s flurry of deals the $240m tie-up with Moderna Therapeutics did not even buy it an equity stake or a clinical asset.

But then the price of the Almirall portfolio simply reflects the fact that the lead asset involved is a bit pedestrian. The only marketed product – the LAMA Eklira Genuair – has struggled to make a mark on the multi-billion-dollar COPD market, generating in-market sales of just $190m last year.

Priced in

Still, this is reflected in the price. Look no further than EvaluatePharma’s calculation of the NPV of Almirall’s interest in Eklira, which at $998m is actually higher than the sum Astra has handed over on signing.

Astra will surely wage a price war against Glaxo’s Advair/Seretide, the clear market leader, and put more pressure on its troubled UK neighbour (Glaxo’s breath quickens after assault on several fronts, July 29, 2014). It might also try to unwind Almirall’s deal with Forest, now part of Actavis, which sells Eklira in the US and has rights to several pipeline projects there.

That said, Astra’s interest lies not in the marketed drug but in Almirall’s pipeline, on the development of which a further $1.2bn in contingent payments rests. And while this includes several underwhelming formulations, a few should make investors sit up and take notice.

Nearest to launch is a combination of Eklira with formoterol, which is filed in Europe; the US FDA recently requested further discussion regarding manufacturing. Also important is the LABA abediterol, in phase II, and the MABA project LAS190792 (phase I, with several preclinical backups).

The portfolio also holds the possibility of triple combinations – perhaps the next frontier in COPD combo drug development. Here Astra would compete with Glaxo, Chiesi and Boehringer Ingelheim, which are all working on LABA/LAMA/steroid combos.

However, there are now important question marks around Astra’s acquisition of Pearl, a private group, for up to $1.15bn a year ago (Astra’s Soriot finds hidden value in private assets, June 10, 2013). A comparison of the Pearl and Almirall transactions reveals several notable overlaps.

For instance, each deal includes a late-stage LAMA/LABA combo to challenge Glaxo/Theravance and Novartis/Vectura, though Almirall’s is more advanced than Pearl’s. The Pearl portfolio includes PT010, a triple combination, while Astra was already working on the MABA AZD2115 under an alliance with Argenta Discovery (now part of the Pulmagen spin-out).

One question, therefore, is whether it makes any sense for Astra to develop both versions of each mechanistic approach. And, if it does not, why did the group buy one company only to throw more money a year later at a second business with very similar assets?

The answer might lie in the fact that each company uses a different device, and Astra likely wants to hedge its bets rather than staking everything on one project. It is still not clear whether once or twice-daily combinations are best, and through Pearl and Almirall Astra will have a shot at both.

At a time when Glaxo is suddenly under threat it will be interesting to see whether this warning shot will prompt a pricing rethink at Astra’s UK competitor; pricing the newly launched Breo at parity with Symbicort is one reason why the novel combination has struggled to get off the ground.

Pfizer, once an important respiratory player, but one at which this therapy area has been de-emphasised of late, will now surely be considering its options.

To contact the writers of this story email Jacob Plieth or Amy Brown in London at [email protected] or follow @JacobEPVantage or @AmyEPVantage on Twitter