viewAstraZeneca PLC

More M&A to follow AstraZeneca tie-up with ZS Pharma

Companies likely to do bolt-on deals as well as big takeovers

AstraZeneca said ZS Pharma would boost its focus on cardiovascular disease

AstraZeneca’s US$2.7bn swoop on US rival ZS Pharma makes sense and is unlikely to be the last takeover move in a wave of M&A activity sweeping the industry, analysts said.

AstraZeneca (LON:AZN) said on Friday that it had definitively agreed to buy ZS (NASDAQ:ZSPH) , which is developing a drug to combat potentially dangerous levels of potassium in blood, known as hyper-kalaemia, for US$90 a share.

The Anglo-Swedish company said the move continued its track record of developing its business with three main therapy areas in mind, including cardiovascular and metabolic disease.

Brokers said the buy was sensible and would enable AstraZeneca to develop treatments for kidney problems around its pipeline anaemia drug roxadustat.

Richard Parkes at Deutsche Bank said: “AstraZeneca’s acquisition of ZS Pharma makes clear strategic sense to us.”

AstraZeneca and other big industry players are facing increasing pressure to develop new drugs to replace those facing competition from copy-cat generic manufacturers.

AstraZeneca cautioned in its third quarter trading update on Thursday that 2016 would be pivotal as its flagship cholesterol drug Crestor would lose exclusivity in the US.

The company is already seeing competition from producers of generic versions of its drugs such as stomach upset treatment Nexium, which lost exclusivity in February.

Other companies facing competitive pressure on older products are also pursuing acquisitions as a way of developing new treatments.

Shire (LON:SHP) launched a US$30bn bid for Baxalta in August, which has stalled since the latter rejected it as undervaluing the company.

Shire’s chief executive Flemming Ornskov vowed last month to keep pursuing Baxalta, although he acknowledged the company was considering other smaller deals - without identifying them.

The company has been rumoured to be interested in osteoporosis specialist Radius Health (NASDAQ:RDUS) and is also thought to have looked at ZS Pharma.

Swiss drug giant Actelion (VTX:ATLN)  has previously disclosed that it was in early-stage talks with ZS.

Following news of the AstraZeneca deal with ZS, shares in another company with a hyper-kalaemia treatment, Relypsa, rose 17% as traders speculated that it could face a possible takeover bid from Actelion or others, according to financial website Seeking Alpha.

The US Food & Drug Administration (FDA)  reportedly cleared Relypsa's hyperkalaemia treatment, Veltassa, a few weeks ago.

Competitive bid process

Deutsche’s Parkes said the AstraZeneca deal with ZS seemed to have resulted from a competitive bid process aimed at selling the US hyper-kalaemia specialist, which would reduce the likelihood of counter-bids.

Comments from AstraZeneca’s management suggested they were unlikely to launch big takeovers, although they may do more strategic bolt-on deals, he said.

AstraZeneca was itself the target of a £69.4bn hostile takeover bid by Pfizer last year, although that foundered partly due to concerns about US firms basing themselves abroad to cut their tax bills.

Abbvie also hit the same problem in an unsuccessful £32bn approach to Shire last year. Abbvie ditched talks with Shire after the introduction of a new US rule discouraging mergers that would lower a US company’s tax rate.

Despite speculation that giants like Pfizer have not ruled out big deals - having confirmed last month that it was in talks with Allergan - the takeover failures have prompted talk of a greater industry focus on smaller buys that would not overstretch company finances.

Earlier this week, Shire announced the US$5.9bn acquisition of hereditary angioedema specialist Dyax.

Jefferies analysts said the deal would allow Shire to save money and remove a potential competitor for its own angioedema franchise while not threatening its plans to buy Baxalta.

Jefferies said in a note: “As a debt-funded cash deal we see no direct implication for the proposed all-equity Baxalta combination.”

The ZS deal will give AstraZeneca access to the US company’s ZS-9 treatment - an insoluble, non-absorbed zirconium silicate designed to trap potassium ions to lower and maintain control of serum potassium levels.

Hyper-kalaemia, or high potassium levels, occurs in 23-47% of patients with chronic kidney disease and/or chronic heart failure and can cause cardiac arrest and death, with a mortality rate of up to 20%.

AstraZeneca chief executive Pascal Soriot said: “This acquisition complements our strategic focus on cardiovascular and metabolic disease.”

Quick facts: AstraZeneca PLC


Price: 8376 GBX

Market Cap: £129.48 billion

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events


The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...


Supermarket Income REIT snap up six new acquisitions

Supermarket Income REIT PLC (LSE:SUPR)'s (LSE:SUPR) has acquired six supermarkets for a total purchase price of £113.1mln, including Marks & Spencer as a tenant for the first time. Steven Noble from Atrato Capital explains the rationale behind the purchases which consist of a Tesco in...

1 hour, 18 minutes ago

4 min read