There have been several noteworthy developments in the drug space recently, which will likely have a material impact on the companies in this sector and the markets they serve. Companies mentioned in this review include Pfizer Inc. (PFE - Free Pfizer Stock Report), AstraZeneca (AZN), and Johnson & Johnson (JNJ - Free Johnson & Johnson Stock Report).
Pfizer’s Animal Health Spinoff is Nearly Complete
Last month, the world’s largest drugmaker announced plans to spin off its majority stake in animal health business Zoetis through an exchange offer, reflecting its continued efforts to focus primarily on drugs and vaccines for humans. On June 19th, Pfizer announced the final exchange ratio of 0.9898 and the automatic extension of the offer to midnight on Friday, June 21st. The extension was put into effect as a result of the upper limit of the exchange being met. The transaction was designed to give Pfizer shareholders an incentive to swap part of their holdings and let the drugmaker close out its stake in Zoetis. Under the terms, Pfizer shareholders are expected to get about $105 worth of Zoetis stock, for every $100 of Pfizer stock accepted in the exchange.
AstraZeneca Broadens its Respiratory Portfolio
On June 10th, Britain’s second-largest drugmaker announced that it had entered into a definitive agreement to acquire Pearl Therapeutics, a privately-held company specializing in the development of respiratory medications. The acquisition would give AstraZeneca access to a potential new treatment for chronic obstructive pulmonary disease (COPD), currently in late-stage clinical trials, and inhaler and formulation technology that provides a platform for future combination products. Under the terms of the agreement, AstraZeneca will pay an initial $560 million, plus up to $450 million if specified development and regulatory milestones are met, in addition to sales-related payments of up to a further $140 million. This would result in a total acquisition cost of $1.15 billion. The proposed transaction is subject to customary regulatory approvals and is expected to close in the third quarter of 2013.
Johnson & Johnson Buys Aragon
On June 19th, Johnson & Johnson agreed to buy Aragon Pharmaceuticals for at least $650 million in cash, a move that should provide a nice boost to its prostate cancer drug portfolio. Based in San Diego, privately-held Aragon focuses primarily of the development of drugs to treat hormonally driven cancers. The deal gives J&J the rights to its lead drug candidate ARN-509, a prostate cancer treatment currently engaged in Phase II trials. Under terms of the agreement, J&J will make an upfront cash payment of $650 million, plus additional payments of up to $350 million if certain milestones are met. The boards of both companies have approved the sale and its completion is expected in the third quarter.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.