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AZN shares slip 1% on Monday
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Farxiga-baxdrostat combination could extend franchise - AZN exec
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Fall in value of biotech companies could drive deal-making
Jan 9 (Reuters) - AstraZeneca said on Monday it had struck a deal to buy U.S.-based drug developer CinCor Pharma Inc for up to $1.8 billion to increase 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 high blood pressure and chronic kidney disease.
AstraZeneca aims to combine baxdrostat with its own Farxiga, a diabetes drug whose sales ballooned after it was also shown to benefit patients with heart failure and kidney disease.
Farxiga, whose sales jumped by almost 50% during the first nine months of 2022 to reach $3.2 billion, belongs to a highly competitive class of drugs that includes rivals such as Boehringer Ingelheim and Eli Lilly's Jardiance.
AstraZeneca gets about a third of its revenue from cancer drugs, but its heart, kidney and diabetes medicines are its second most lucrative business by sales, generating roughly $6.9 billion of the drugmaker's total revenue of more than $33 billion in the first three quarters of 2022.
Farxiga and the oncology drugs Lynparza and Calquence could face generic competition as early as 2024, BMO Capital Market analysts said in a note last week, citing their own assumptions and company filings.
In theory, a combination of baxdrostat with Farxiga could enable AstraZeneca to prolong its Farxiga franchise, Mene Pangalos, executive vice president of bioPharmaceuticals R&D at AstraZeneca, said.
DEAL AT NEARLY 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 nearly 121% to the U.S.-based company's closing price on Friday.
The offer also includes a non-tradable contingent value right of $10 per share in cash payable upon a specified regulatory baxdrostat submission.
CinCor's shares closed at $11.78 on Friday, well below its initial public offering price of $16 per share in January 2022.
"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 fell around 20% by mid-December from its peak in August 2021, giving large drugmakers impetus to seek deals to replenish their pipelines as their big sellers approach the end of their patent life.
CinCor's baxdrostat has a mixed track record in treating hypertension.
Although it succeeded in a phase II treatment-resistent hypertension trial, the drug failed to outperform a placebo in another mid-stage study involving patients with uncontrolled high blood pressure.
In mid-session trading on Monday, AstraZeneca's stock slipped about 1%.
Before joining CinCor, CEO Marc de Garidel led AstraZeneca- spinoff Corvidia Therapeutics, which Novo Nordisk took over in 2020 for $2.1 billion.
Garidel is also chairman (and former CEO) of French drugmaker Ipsen, which separately on Monday agreed to buy U.S-based drugmaker Albireo for just under $1 billion to enrich its rare disease pipeline. (Additional reporting by Radhika Anilkumar in Bengaluru and Ludwig Burger in Frankfurt; editing by Susan Fenton, Jason Neely and Barbara Lewis)
