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AstraZeneca to Buy Pearl Therapeutics

Zacks Equity Research

Recently, AstraZeneca (AZN) entered into a definitive agreement to purchase US-based privately-held company Pearl Therapeutics. The deal will add late-stage chronic obstructive pulmonary disease (:COPD) candidate, PT003, to AstraZeneca’s pipeline. The transaction is expected to close by the third quarter of 2013 subject to regulatory approvals.

As per the terms of the agreement, AstraZeneca will acquire all the shares of Pearl Therapeutics for an initial payment of $560 million. AstraZeneca will make an additional payment of up to $590 million depending on the achievement of development, regulatory and sales milestones.

AstraZeneca does not expect the Pearl Therapeutics acquisition to impact its guidance for 2013. The company expects 2013 revenue to decline in the mid-to-high single-digits and core earnings to decline considerably more than revenue.

We are pleased with AstraZeneca’s efforts to bolster its pipeline and believe that the Pearl Therapeutics deal makes strategic sense. It marks AstraZeneca’s third acquisition deal in the second quarter of 2013. AstraZeneca entered into a definitive agreement to purchase Omthera Pharmaceuticals, Inc. (OMTH) in May 2013 and acquired AlphaCore Pharma in Apr 2013, boosting its cardiovascular pipeline.

AstraZeneca’s pipeline is currently under severe pressure with revenues plunging due to generic competition faced by several key drugs including Seroquel. The company will face additional pressure once Nexium (2014) and Crestor (2016) start facing generics.

AstraZeneca carries a Zacks Rank #3 (Hold). Currently, companies like Santarus, Inc. (SNTS) and Salix Pharmaceuticals (SLXP) look more attractive with a Zacks Rank #1 (Strong Buy).

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