A couple of months after Wall Street turned its nose up at Omthera's IPO, AstraZeneca ($AZN) has come along with a deal to snap up the biotech and its late-stage cardiovascular therapy with an upfront payout that values the company at about twice its market cap. The Big Pharma company--which is attempting to repair one of the most badly damaged pipelines in the industry--is paying $12.70 a share for the company, or $323 million, along with up to $120 million in contingent value rights, based on the success of Omthera's omega-3 drug Epanova.
Princeton, NJ-based Omthera ($OMTH) was just months away from filing for approval of Epanova when it went public in March, but investors didn't buy into the biotech's pitch. After setting a range of $12 to $14 a share for the company, the IPO went out at $8 and shares subsequently declined to $6.77 on Friday's close. The company's market cap was set at $165 million and AstraZeneca assigned the company's pre-acquisition market value at $260 million, including $63 million in cash. But even based on its own numbers, AstraZeneca is likely to face questions about whether it paid too much for the company.
The buyout helps AstraZeneca on two key initiatives. It provides a late-stage asset near filing, adding its first Phase III product since CEO Pascal Soriot stepped up with a new strategy to restructure the company. And it fits into the company's plan to focus more heavily on cardiovascular drugs. AstraZeneca is also significantly better positioned to market Omthera's drug, which will require a major sales effort if it's ever to achieve major sales.
AstraZeneca's ultimate success with this deal is pinned entirely on the fate of Epanova, an omega-3 therapy that demonstrated its ability to lower non-HDL cholesterol from baseline after 6 months of treatment over the course of a Phase III study. If successful at the FDA, Omthera will be poised to take on GlaxoSmithKline's ($GSK) Lovaza as well as Vascepa, which Amarin ($AMRN) has been struggling to launch.
At the end of January, Amarin elected to launch Vascepa on its own as a treatment for high triglycerides. But while GSK has earned hundreds of millions of dollars on annual sales of Lovaza, Amarin's go-it-alone approach, after waiting fruitlessly for an FDA decision on NCE status needed to lock down an extended period of patent protection, is expected to proceed slowly. And AstraZeneca is planning an ambitious sales drive as it looks for fresh revenue in the face of generic competition.
"The number of people with elevated triglyceride levels is rising rapidly across the world, due in part to the increasing prevalence of obesity and diabetes," said Soriot in a statement. "There is a clear need for effective and convenient alternatives to some of the existing treatments. Epanova offers real potential both as a distinctive monotherapy for the treatment of hypertriglyceridemia and in combination with Crestor for patients at high risk of adverse cardiovascular events. This is an exciting acquisition that clearly complements our existing portfolio in cardiovascular and metabolic disease, one of our core therapy areas."
- here's the press release