AstraZeneca has entered into an agreement to invest in a majority equity stake in Acerta Pharma, a privately-owned biopharmaceutical company based in the Netherlands and US.
The transaction provides AstraZeneca with an irreversible oral Bruton’s tyrosine kinase (BTK) inhibitor, acalabrutinib (ACP-196), currently in Phase III development for B-cell blood cancers and in Phase I/II clinical trials in multiple solid tumours.
“The investment is consistent with our focus on long-term growth and reflects the role targeted business development plays in our business model. We are boosting a key area in our comprehensive oncology portfolio with a late-stage, potential best-in-class medicine that could transform treatment for patients across a range of blood cancers,” says Pascal Soriot, Chief Executive Officer of AstraZeneca. “Acalabrutinib provides us with a small molecule presence in blood cancers to complement our existing immunotherapy approach, in collaboration with Celgene in haematological malignancies. Furthermore, we look forward to working closely with the Acerta team and benefiting from the considerable clinical expertise they bring in this complex area of medicine.”
An upfront payment of $2.5 billion
Under the terms of the agreement, AstraZeneca will acquire 55% of the entire issued share capital of Acerta for an upfront payment of $2.5 billion. A further unconditional payment of $1.5 billion will be paid either on receipt of the first regulatory approval for acalabrutinib for any indication in the US, or the end of 2018, depending on which is first. The agreement also includes options which, if exercised, provide the opportunity for Acerta shareholders to sell, and AstraZeneca to buy, the remaining 45% of shares in Acerta. The options can be exercised at various points in time, conditional on the first approval of acalabrutinib in both the US and Europe and when the extent of the commercial opportunity has been fully established, at a price of approximately $3 billion net of certain costs and payments incurred by AstraZeneca and net of agreed future adjusting items, using a pre-agreed pricing mechanism.
An extensive development programme is underway for acalabrutinib with the opportunity for initial regulatory submissions in the second half of 2016 for the treatment of patients with specific types of haematological malignancies. Expanding further into B-cell cancers, acalabrutinib is estimated to reach potential peak-year sales in excess of $5 billion globally. AstraZeneca will also benefit from the substantial expertise in haematological cancers offered by Acerta’s approximately 150 employees.
Acerta will initially be a majority owned subsidiary of AstraZeneca; if AstraZeneca acquires the remaining shares of the company in the future, Acerta would become a wholly-owned subsidiary. The transaction will be accounted for as a business combination and is expected to complete by the end of the first quarter of 2016, subject to customary closing conditions. The initial acquisition payment of $2.5 billion will be funded from cash and debt. The agreement is expected to be moderately dilutive to AstraZeneca’s core earnings in the near term.
For the purposes of the UK Listing Authority’s Listing Rule LR 10.4.1 R (Notification of class 2 transactions), the fair value of gross assets acquired with the transaction is estimated to be $5.7 billion and, in view of the development phase of the medicine, a pre-tax loss of $80 million was attributable to Acerta during the year to 31 December 2014.
Full Year 2016 guidance is expected to be provided at Full Year 2015 results on 4 February 2016.
Several acquisitions lately
This is the second acquisition for AstraZeneca this week. The company recently acquired Takeda’s respiratory business for $575 million. AstraZeneca has also, along with MedImmune, its global biologics research and development arm, made a range of strategic initiatives to accelerate the delivery of innovative biologics and targeted medicines to patients in China, the company’s second largest market globally and a key growth platform. A little over a month ago AstraZeneca also acquired ZS Pharma, a biopharmaceutical company based in San Mateo, California, for for $2.7 billion.