AstraZeneca Expands Heart, Kidney Business With $1.8B CinCor Deal

Summary

• AZN shares slide 1% on Monday
• Farxiga-baxdrostat combination could prolong franchise – AZN exec
• Fall in value of biotech firms could push deal-making

AstraZeneca (AZN.L) said on Monday it had reached an agreement to purchase U.S.-based drug developer CinCor Pharma Inc (CINC.O) in a deal worth up to $1.8 billion to boost its stock of heart and kidney drugs.

Core to the deal is CinCor’s experimental therapy baxdrostat, which is in development to treat conditions including chronic kidney disease and high blood pressure.

AstraZeneca intends to combine baxdrostat with its own Farxiga, a diabetes drug whose sales surged after it was also proven to benefit patients with kidney disease and heart failure.

Farxiga, whose sales rose by almost 50% during the first three quarters of 2022 to hit $3.2 billion, belongs to a highly competitive class of drugs that includes rivals such as Eli Lilly’s Jardiance and Boehringer Ingelheim.

AstraZeneca earns about a third of its revenue from cancer drugs, but its heart, diabetes, and kidney medicines are its second most profitable business by sales, generating almost $6.9 billion of the drugmaker’s total revenue of more than $33 billion in the first nine months of 2022.

Farxiga and the oncology drugs Calquence and Lynparza could face generic competition as early as 2024, BMO Capital Market analysts said in a note last week, referencing their own assumptions and company filings.

In theory, a combination of baxdrostat with Farxiga could enable AstraZeneca to extend its Farxiga franchise, Mene Pangalos, executive vice president of bioPharmaceuticals R&D at AstraZeneca, said.

AstraZeneca CinCor Deal At Almost 121% Premium

The Anglo-Swedish drugmaker on Monday agreed to pay $26 per CinCor share in cash, or $1.3 billion in total, a premium of about 121% to the U.S.-based company’s closing price on Friday.

This offer also comprises a non-tradable contingent value right of $10 per share in cash payable upon a specified regulatory baxdrostat submission. CinCor’s shares ended Friday at $11.78, well below its initial public offering price of $16 per share in January last year.

“Obviously, there’s been a devaluation of biotech companies over the past year,” said Pangalos. “I think we’re very happy with what we’ve managed to achieve here in terms of the cost.”

The value of the Nasdaq Biotechnology Index (.NBI) plunged around 20% by mid-December from its peak in August 2021, giving big drugmakers impetus to seek deals to restock their pipelines as their best sellers approach the end of their patent life.

CinCor’s baxdrostat has a mixed track record in treating hypertension. Although it was successful in a phase II treatment-resistant hypertension trial, the drug didn’t outperform a placebo in another mid-stage study involving patients with uncontrolled high blood pressure.

In mid-session trading on Monday, AstraZeneca’s stock slid about 1%.

Before joining CinCor, CEO Marc de Garidel headed AstraZeneca- spinoff Corvidia Therapeutics, which Novo Nordisk (NOVOb.CO) acquired in 2020 for $2.1 billion.

Garidel is also chairman (and former CEO) of French drugmaker Ipsen (IPN.PA), which separately on Monday agreed to purchase U.S-based drugmaker Albireo (ALBO.O) for just under $1 billion to add to its rare disease pipeline.