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November 6, 2015

AstraZeneca to Acquire ZS Pharma for $2.7B

  • AstraZeneca said today it will acquire ZS Pharma for approximately $2.7 billion, in a deal designed to expand the buyer’s cardiovascular and metabolic disease portfolio.

    That portfolio will, if the deal is completed, include ZS Pharma’s first product candidate, which is now under U.S. regulatory review—the potassium-binding compound ZS-9 for hyperkalemia. ZS-9 is an insoluble, nonabsorbed zirconium silicate designed to preferentially trap potassium ions in order to lower and maintain control of serum potassium levels.

    The FDA is reviewing ZS Pharma’s application for ZS-9, which has a Prescription Drug User Fee Act (PDUFA) decision date set for May 26, 2016.

    A Marketing Authorization Application for ZS-9 is expected to be submitted to the European Medicines Agency by year’s end—by which time, AstraZeneca said, the acquisition deal is expected to close. That closing is subject to customary conditions that include the tender of a majority of the outstanding ZS Pharma shares and the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

    In acquiring ZS Pharma, AstraZeneca appears to have topped an offer by Actelion. The Swiss drug developer disclosed on September 10 that it had “initiated preliminary discussions” with ZS Pharma, “with no commitment on either party,” following a Bloomberg News report that Actelion was planning to buy the U.S. biotech for $2.5 billion.

    AstraZeneca cited the deal’s compatibility with one of its three key therapeutic specialties, as well as estimates that ZS-9 will eventually be a blockbuster drug with global peak year sales exceeding $1 billion.

    “This acquisition complements our strategic focus on cardiovascular and metabolic disease by adding a potential best-in-class treatment to our portfolio of innovative medicines,” AstraZeneca CEO Pascal Soriot said in a statement. “We look forward to welcoming the ZS Pharma team to AstraZeneca.”

    The company’s other two strategic areas are (first) oncology and (second) respiratory, inflammation, and autoimmunity diseases.

    According to AstraZeneca, ZS-9 fits with its increased focus on chronic kidney disease (CKD) and chronic heart failure (CHF)—two disorders with which hyperkalemia is associated. AstraZeneca’s Phase III compound roxadustat, for example, is in development for patients with anemia associated with CKD. But AstraZeneca doesn’t expect to file a regulatory submission for roxadustat in the United States until 2018; no date has been set for Europe or Japan, though a China filing is planned for 2016.

    During the first nine months of this year, AstraZeneca reported total product sales of $7.029 billion from its marketed cardiovascular and metabolic disease drugs, up 3% from January–September 2014 at constant exchange rates.

    AstraZeneca’s best-selling cardiovascular drug, the cholesterol-lowering treatment Crestor (rosuvastatin calcium), saw its sales dip 4% from a year earlier, to $3.695 billion during Q1–Q3 2015. “The performance reflected competition from generic statins and price pressures,” AstraZeneca said yesterday in a press release announcing third-quarter results.

    Crestor accounts for more than half of AstraZeneca’s cardiovascular and metabolic drug sales. Those sales are expected to decline next year in the United States, where the substance patent is set to expire January 8, and the pediatric exclusivity period ends July 8.

    Headquartered in San Mateo, CA, ZS Pharma develops hyperkalemia treatments using its ion­-trap technology, which uses crystals with selective pores that preferentially take up a specific ion, such as potassium. According to the company, ion-trap candidates are hypothesized to mimic selectivity of the body’s own ion channels.

    ZS Pharma has about 200 employees based across three sites in California, Texas, and Colorado.

    AstraZeneca agreed to acquire all outstanding capital stock of ZS Pharma for $90 per share in an all-cash tender offer, followed by a merger in which each remaining untendered share of ZS Pharma common stock would be converted into the same $90 cash per share consideration as in the tender offer. Following completion of the deal, ZS Pharma will become a wholly owned subsidiary of AstraZeneca.

    The board of directors of ZS Pharma has unanimously approved the planned acquisition.

    AstraZeneca said the pending deal will not affect its investor guidance for this year, which was raised just yesterday. The company now expects total revenue to be “in line with the prior year,” or $26.095 billion, up from a low single-digit percent decline from 2014.

    “Core” earnings per share are now expected to rise by “a mid- to high-single digit percent,” up from a low single-digit percent increase. Core results exclude amortization, impairment of intangibles, restructuring charges, legal settlements, deal-related costs, and other specified items.

    The deal is expected to generate product sales next year, with minimal earnings dilution in 2016 and 2017, and add to core earnings starting in 2018, the pharma giant added.

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