Swedish Orphan Biovitrum (Sobi™) has agreed to acquire U.S. rights to the marketed drug Synagis® (palivizumab) from AstraZeneca, and receive the pharma giant’s half-share of future U.S. profits and losses for the vaccine candidate MEDI8897, for $1.5 billion in cash and stock, plus potential milestone payments.

Both Synagis and MEDI18897 are indicated for preventing serious lower respiratory tract infection (LRTI) caused by respiratory syncytial virus (RSV) in defined categories of infants and children. AstraZeneca is developing MEDI18897 through a collaboration with Sanofi Pasteur, the vaccines division of Sanofi.

Sobi said the deal will complement its existing pipeline and diversify its revenue base in pediatric and immunology treatments. Synagis would join Sobi’s immunology franchise, which now consists of Kineret® (anakinra), a marketed drug for rheumatoid arthritis and Cryopyrin-Associated Periodic Syndromes (CAPS); and emapalumab, a treatment for the rare disease primary haemophagocytic lymphohistiocytosis (pHLH) that is now under FDA review.

For the 12 months ending June 30, Synagis generated $269 million in U.S. sales. Sobi said it expects Synagis to generate a 60%-plus margin of earnings before interest, taxes, and amortization (EBITA)—enough for the deal to add to the company’s earnings per share in 2019.

Those numbers, Sobi added, will position the company well for its next phase of growth by generating for it substantial recurring earnings to further advance its U.S. expansion and enabling future strategic acquisitions over the mid-term.

Sobi said its purchase of U.S. Synagis rights is expected to more than double both the revenue and size of Sobi’s U.S. organization, increasing by more than one-third the U.S. contribution to Sobi’s overall revenues. Access to a proven U.S. sales and marketing organization will establish a critical scale to drive sustainable growth in the U.S.”

“Stepping Stone” Acquisition

“We see the acquisition as a stepping stone to drive sustainable growth in the U.S. and make Sobi more attractive for partnering,” Sobi president and CEO Guido Oelkers said in a statement. “The addition of Synagis will become an important strategic catalyst for Sobi’s future development and will form a powerful platform for growth in rare diseases.”

Sobi bolstered its rare disease presence in August when it completed its acquisition of global rights to emapalumab from the drug’s discoverer and original developer Novimmune for CHF 50 million ($49.5 million) in upfront cash, and CHF 400 million ($396 million) in additional payments over eight years.

Sobi’s North American staff is preparing to launch emapalumab, for which the FDA has set a Prescription Drug User Fee Act (PDUFA) target decision date of November 20. Sobi is also awaiting European Medicines Agency review of emapalumab, with a decision expected by the end of 2019.

The expanded immunology franchise, Sobi said, would account for the majority of its total drug sales in its “specialty care” category. Specialty care generated SEK 2.308 billion ($254.2 million) in the first nine months of this year, up 11.6% from SEK 2.068 billion ($227.8 million) in Q3 2017.

AstraZeneca said the sell-off continues its efforts to refocus its pipeline more narrowly around its therapeutic areas—and that the deal will have no impact on its 2018 guidance to investors.

Streamlining Portfolio

“We continue to streamline our portfolio, allowing AstraZeneca to allocate resources more effectively, while Sobi’s focus on Synagis will enable infants in the U.S. to continue benefiting from this important treatment. Meanwhile, the successful development and commercialization of MEDI8897 remains important for AstraZeneca.”

Sobi agreed to pay AstraZeneca $1 billion cash, 24,193,092 newly-issued Sobi shares valued at $500 million, based on the daily volume weighted average price paid for the Sobi common share on NASDAQ Stockholm for five trading days immediately before the companies entered into their agreement.

Sobi also agreed to pay AstraZeneca:

  • $60 million cash for MEDI8897—$20 million each year from 2019 through 2021.
  • Up to $470 million for Synagis sales-related milestones from 2026 onwards.
  • A $175 million milestone payment tied to submission of a Biologics License Application (BLA) to the FDA for MEDI8897.
  • Potential net payments of approximately $110 million tied to achieving other MEDI8897 profit and development-related milestones. MEDI8897 associated payments, if payable, are expected from 2023 onward, the companies said.

The acquisition is expected to close by the end of 2018 or early 2019, subject to customary conditions and regulatory approvals. Following completion of the deal, AstraZeneca will hold 8.1% of total shares and votes in Sobi. AstraZeneca has committed to not selling the Sobi shares it will receive under the deal for 12 months, and to not buy additional shares in Sobi for 18 months after the closing of the acquisition.

AstraZeneca said it would use the proceeds from the Sobi acquisition for “general corporate purposes.”

Sobi said it will fund the cash portion of the deal through loans to be drawn from credit facilities of BNP Paribas, Danske Bank, Skandinaviska Enskilda Banken, and Svenska Handelsbanken.