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AstraZeneca Buys Pearl Therapeutics to Bolster its Product Pipeline

On Monday, AstraZeneca announced that it will acquire U.S. pharma startup Pearl Therapeutics for up to $1.15 billion.

AstraZeneca (NYSE: AZN) has a problem. In what could be called poor management, the company finds itself with a pipeline problem. The latest in its blockbuster drugs to go off patent, antipsychotic drug Seroquel, went generic last year and there wasn’t much in the pipeline that had investors excited about the near-term prospects of this once-dominant British drug giant.

AstraZeneca will pay $560 million upfront with up to $450 million if certain development milestones are reached. It will also pay an additional $140 million in sales related payments.

New CEO Pascal Soriot is working to calm investor fears and Monday’s announcement is another step towards that goal. Pearl Therapeutics is a company specializing in respiratory research. It’s drug, PT003 is in final stage III clinical trials but will likely be the third in a new class of drugs to treat COPD to come to market.

The LABA/LAMA class of respiratory drugs is considered the future of COPD therapy. It’s longer-acting and more effective in the treatment of the disease which increases patient compliance.

But being the third company behind GlaxoSmithKline (NYSE: GSK) and Novartis (NYSE: NVS) isn’t a strong position. AstraZeneca is likely more interested in a Phase I drug Pearl is developing. Called, PT010, this is a LABA/LAMA drug that is combined with a corticosteroid. The company believes that the drug can be rapidly moved to Phase II trials and be second in line to gain regulatory approval. Still not first, but much better than third.

The Pearl acquisition follows the deal made to acquire Omthera Pharmaceuticals in May for up to $443 million.

Disclosure: At the time of this writing, Tim Parker had no position in any of the equities mentioned.

[stock-tools exchange="NYSE" symbol="AZN" image_height="180" image_width="300"]

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