AstraZeneca Sells Small-Molecule Antibiotics To Pfizer But Still Investing In R&D

AstraZeneca PLC – one of a few remaining big pharmas investing in antibiotics R&D – is giving up its late-stage small molecule antibiotics portfolio to Pfizer Inc. The two drug makers announced a deal Aug. 24, whereby AstraZeneca will sell commercialization and development rights to its commercial and late-stage small molecule antibiotics business in most markets outside the US to Pfizer in exchange for $550m upfront plus a delayed $175m payment in 2019 and regulatory and sales milestones.

Pfizer plans to include the programs in its Essential Health portfolio, the area of its business that includes generic drugs and mature brands, rather than Innovative Health, a signal perhaps to the type of commercial opportunity novel antibiotics provide today.

The deal, potentially worth up to $1.5bn, was announced just two days after Pfizer revealed it was the winner of a competitive auction to buy Medivation Inc., a $14bn deal that will bulk up the company’s innovative oncology portfolio.

AstraZeneca’s decision to sell its small molecule antibiotics to Pfizer isn’t a surprise. The company has been active monetizing assets in therapeutic areas deemed non-core, but the news still will be considered a disappointment to health authorities and experts in the field who saw AstraZeneca as one of the holdouts in an important area for public health that many other big pharmas have walked away from.

AstraZeneca’s commitment to antibiotics has been in doubt since at least 2014, when speculation arose that the business would be put up for sale while the company focuses on core therapy areas like oncology, respiratory and cardiovascular/metabolic disease (Also see "AstraZeneca Straddles The Fence On Antibiotics; Is It About To Fall Off?" - Pink Sheet, 21 Oct, 2014.).

In an even bigger signal, AstraZeneca spun out its early-stage R&D for small molecule antibiotics into a new company called Entasis Therapeutics in 2015 (Also see "AstraZeneca Will Establish Antibiotic Subsidiary With $40 Million" - Pink Sheet, 2 Mar, 2015.).

AstraZeneca insisted it will continue to develop novel antibiotics under its biologics arm MedImmune, where it sees a bigger opportunity to develop novel approaches.

MedImmune’s antibacterial agents include MEDI4893 and MEDI3902, monoclonal antibodies that both achieved FDA fast track status in 2014. MEDI4893 is in Phase II trials for the prevention of pneumonia caused by Staphylococcus aureus (S. aureus) in intensive care unit patients, and MEDI3902 is in Phase II clinical trials for the prevention of nosocomial pneumonia caused by Pseudomonas aeruginosa (P. aeruginosa).

The reasons most big drug manufacturers aren’t interested in developing new antibiotics, despite the serious health threat, are many, including that developing new approaches is difficult and the reward for the investment is uncertain. New antibiotics compete against a wide array of generics and are held in reserve to be used as a last resort, not exactly a compelling commercial proposition, despite new government incentives to encourage development and the ability of some novel antibiotics to command premium prices (Also see "Antibiotic Market Snapshot: In Exchange For Higher Prices, More Value" - Pink Sheet, 14 Jan, 2013.).

Merck & Co. Inc. is one company that is continuing to invest in antibiotics, following on its $9.5bn acquisition of antibiotics specialist Cubist Pharmaceuticals Inc., announced in 2014 (Also see "Under Pressure: Can Merck Show Cubist Is Worth $9.5 Billion Without Cubicin?" - Pink Sheet, 15 Dec, 2014.)

The looming crisis posed globally by the dearth of new antibiotics was underscored this year by reviews conducted by the UK government under former Goldman Sachs chief economist Jim O’Neil.

Pfizer’s Strategy Focused On Lifecycle Management

Pfizer – once a key player in antibiotics research and the developer of the one-time blockbuster Zyvox (linezolid) – closed its main antibiotics R&D center in Groton, Conn. in 2011 as part of a broader restructuring. Generic versions of Zyvox launched in 2015, putting the product squarely in Pfizer’s Essential Health portfolio, which also includes many other generic anti-infectives. It’s not surprising then that Pfizer is interested in bringing in other mature assets to commercialize.

“As we continue to reshape our Essential Health portfolio, we are focusing on areas that further address global public health needs and that complement our core capabilities and experience in therapeutic areas, including anti-infectives,” Pfizer said in a statement.

The latest transaction includes Merrem/Meronem, a carbapenem used for the treatment of serious infections in hospitalized patients; Zinforo, an intravenous cephalosporin antibiotic intended for use as a monotherapy in treating adult patients with complicated skin and soft tissue infections; and Zavicefta, a new combination antibiotic developed to treat serious Gram-negative bacterial infections.

Zavicefta (ceftazidime/avibactam) was recently recommended for approval by the EU’s Committee for Medicinal Products for Human Use (CHMP). (Also see "AZ's Zavicefta Gains EU Positive Opinion For “Superbug” Infections" - Scrip, 29 Apr, 2016.) Allergan PLC holds rights to the drug in North America; it was approved in the US in 2015 and is marketed as Avycaz.

The AstraZeneca sale also includes clinical-stage products like the injectable ATM-AVI, a bactericidal combination of aztreonam and a Beta-lactamase inhibitor avibactam that is in Phase II development for treating Gram-negative bacterial infections. Pfizer said it will continue the program, along with its partners.

AstraZeneca Continues Externalization Strategy

AstraZeneca’s divestment of its small molecule antibiotics unit is the company’s latest move to focus on its core therapy areas by monetizing non-core assets while accessing new technologies developed outside the company. The company recently has completed several deals where it divested or partnered non-core assets (Also see "AstraZeneca’s Business Development Head Grady Outlines Strategy Mix" - Scrip, 15 Aug, 2016.)