Buying ZS Pharma Could Give AstraZeneca Best-In-Class Blockbuster
This article was originally published in Scrip
Buying California-based ZS Pharma for $2.7bn gives AstraZeneca PLC a potential blockbuster already by next year, adds substance to the pure pharma's offerings for cardiovascular and metabolic disease, and should support its return to growth strategy, analysts say.
Britain's second biggest drug maker apparently outbid Switzerland's Actelion Pharmaceuticals Ltd. to buy ZS Pharma Inc., a victory that brings with it the California-based group's ion trap development program and access to the potassium-binding compound ZS-9, a potential best-in-class treatment for hyperkalaemia, a condition characterized by high levels of potassium in the blood linked with increased mortality in chronic kidney disease and coronary heart failure. The drug is currently being reviewed by the US FDA, with an outcome expected by May 26 next year, while a submission in Europe is planned by the end of 2015.
Announcing the deal on Nov. 6, AstraZeneca's CEO Pascal Soriot told analysts the ZS Pharma buy "is fully in line with our strategy of investing to add potential best-in-class products to our pipeline in our main therapeutic areas." He said the acquisition "gives us access to a near launch-ready, potential best-in-class asset in ZS-9, which, if approved in the US in the first half of 2016, will start bringing in revenue to contribute to our top line by early in the second half of next year."
AstraZeneca is paying $90 a share cash to secure ZS Pharma's proprietary technology and pipeline. Current estimates for global peak year sales of ZS-9 exceed $1 billion, Soriot said.
Hyperkalaemia affects more than three million patients suffering from chronic kidney disease (CKD) and chronic heart failure (CHF) in the US alone. It can be a life-threatening condition with limited alternative treatment options.
ZS-9 does face competition from Relypsa Inc.'s Veltassa (patiromer) which won FDA approval in October with a broad label for treatment of hyperkalemia. But the label includes a box warning about the potential for the drug to bind to other oral medications and the need for a six-hour separation between their administration and Veltassa, which has the potential to make use more difficult.
Analysts at Goldman Sachs said in a broker note that Veltessa's black box warning of interactions with oral medications "could enhance ZS-9's market potential."
AstraZeneca says ZS-9 - a proprietary sodium zirconium cyclosilicate compound - is fundamentally different from the two hyperkalaemia treatments currently on the market, generic kayexalate and Veltassa, which are both organic polymers. ZS-9 is a proprietary zirconium silicate compound and is manufactured as odourless, tasteless crystals. It acts as a highly selective potassium trap, is administered orally in 5 to 15g doses mixed with three tablespoons of water, is not systemically absorbed, and is excreted in faeces.
Morgan Stanley analysts in a note on Nov. 6 said they see ZS-9 as being positioned better than Relypsa's patiromer, "which has a slower onset of action, centralized mail-order hub distribution model, and complex/expensive manufacturing." They noted that Relypsa has also partnered the rights to patiromer with Fresenius Medical Care AG outside of the U.S. and Japan, while ZS Pharma has retained global rights to ZS-9.
Soriot said ZS Pharma's platform and operations will complement AstraZeneca's diabetes franchise as well as roxadustat, its hypoxia inducible factor prolyl hydroxylase inhibitor currently in Phase III for anemia associated with chronic kidney disease and end-stage renal disease.
"We expect that the capabilities and commercial expertise we build together with our new members joining us from ZS to launch ZS-9 will also benefit the future launch of roxadustat," Soriot said, adding that there is significant overlap between healthcare professionals managing patients at risk of hyperkalaemia, and the expected prescribers of roxadustat.
On Nov. 7, ZS Pharma will release long-term data for ZS-9. AstraZeneca said it is aware of the result read-out.
Analysts at UBS noted there is a high unmet need in the high potassium market, as physicians have until now only been able to use either older products such as sodium polystyrene sulfonate potassium binding resins (SPSs) which have potential safety issues such as the risk of intestinal necrosis and other gastrointestinal events, or dietary management. "We believe there is space in the market for both patiromer and ZS-9; however, if ZS-9 can demonstrate that drug binding is not an issue, then it may have an edge."
Upon completion of the deal, ZS Pharma, which has around 200 employees across three sites in California, Texas and Colorado, will become a wholly owned subsidiary of AstraZeneca. It said the deal would not impact its financial guidance for 2015 and is expected to generate product sales from 2016, with minimal earnings dilution over 2016 and 2017, becoming accretive to AstraZeneca’s core earnings from 2018. The transaction was announced the day after AstraZeneca raised its full-year earnings forecast despite the sliding sales of some of its top-selling medicines, and gave a pipeline update.
Analysts at Carnegie were positive about the group's latest acquisition.
"We believe that the deal makes strategically sense as AstraZeneca has a strong foothold and heritage in cardiovascular but the pipeline in this area look thin. There should be some synergy potential with other late stage assets such as roxadustat in chronic kidney disease and also with Brilinta within chronic heart failure, but more importantly, we believe that attractiveness of the deal also come from leveraging Astra’s global reach and thus capturing the full global market potential."
ZS Pharma was until recently said to be in discussions with Actelion for a buyout at around $2.5bn. On September 10, Actelion issued a statement confirming it had initiated preliminary discussions with the California-based group "without any commitment on either party". Asked for a reaction to ZS Pharma's sale to AstraZeneca, an Actelion spokesperson in an email replied: "We have no comment over what we published on September 10."
ZS Pharma CEO Robert Alexander in a statement said “We look forward to joining AstraZeneca and to working together to bring this important treatment for hyperkalaemia to the global market, helping to meet an important unmet medical need for patients.”
AstraZeneca's three main therapeutic areas are cardiovascular and metabolic disease, oncology, and RIA (Respiratory, Inflammation and Autoimmunity).