Pfizer to Buy Antibiotics From AstraZeneca for $725 Million

(Bloomberg) -- Pfizer Inc. agreed to buy an antibiotics business from AstraZeneca Plc for $725 million as well as other payouts, settling for one piece of a company it once tried to acquire.

Pfizer will pay $550 million to AstraZeneca when the transaction closes and make another payment of $175 million in January 2019, according to a statement Wednesday. In addition, AstraZeneca is eligible to receive as much as $250 million in milestone payments, up to $600 million in sales-related payments, as well as certain royalties.

New York-based Pfizer has been looking for ways to bolster both its pipeline and portfolio of marketed drugs after two failed attempts at a major acquisition, first with AstraZeneca in 2014, then with Allergan Plc this year. The U.S. drugmaker this week agreed to buy Medivation Inc., maker of the Xtandi prostate cancer drug, in a $14 billion deal.

AstraZeneca, meanwhile, has been shoring up its declining revenue by licensing out and selling assets that aren’t central to its business, enabling investment in focus areas like cancer research. The London-based drugmaker in June sold rights to its anesthetics medicines, another non-essential area, to Aspen Pharmacare Holdings Ltd. Revenue from “externalization,” as the company calls it, and divestments was $2.3 billion last year, and AstraZeneca has said it would generate more than that this year.

Severe Infections

Pfizer rose less than 1 percent at 9:39 a.m. in New York to $35.13 a share. AstraZeneca rose less than 1 percent to 5,070 pence as in London. The stock has risen 9.7 percent this year.

As a result of the divestment, AstraZeneca will cease to invest in commercial activities in its small molecule antibiotics business, and doesn’t anticipate that any of its sales force will be transferred to Pfizer as part of the transaction, a spokeswoman said in an e-mailed response to questions.

Pfizer is buying rights to several of AstraZeneca’s experimental and approved antibiotics in global markets outside the U.S., including Zavicefta, which is used to treat severe bacterial infections resistant to other drugs -- an area of growing need.

The transaction will give Pfizer rights to three medicines already on the market, including Zavicefta, which was approved by the European Commission in June. It also gives Pfizer two drugs that are still in clinical development, including one to treat methicillin-resistant staphylococcus, or MRSA, infections.

AstraZeneca’s portfolio will add to more than 60 anti-infective and anti-fungal medicines that Pfizer sells, said John Young, group president at Pfizer Essential Health, in the statement.

AstraZeneca is “pleased that our strong science in antibiotics will continue to serve a critical public health need through Pfizer’s dedicated focus on infectious diseases,” said Luke Miels, executive vice president for Europe, in the statement.

The deal doesn’t include biotechnology products in development at AstraZeneca’s MedImmune unit, or AstraZeneca’s stake in Entasis Therapeutics, a company developing new small-molecule anti-infectives.

To contact the reporters on this story: Natasha Khan in Hong Kong at nkhan51@bloomberg.net, Ketaki Gokhale in London at kgokhale@bloomberg.net. To contact the editors responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net, John Lauerman, Kristen Hallam