AstraZeneca has struck a $500m deal to sell the marketing rights for two heart drugs, in the latest example of the UK pharmaceuticals group using licensing agreements to boost flagging revenues. China Medical System Holdings will pay AstraZeneca $310m for the rights to sell its Plendil blood pressure medicine in China and $190m for its Imdur angina treatment in all regions except the US.
These will add to a series of similar deals in which AstraZeneca has sold rights to non-core assets and booked the resulting licence fee as revenues.
Some investors have questioned the use of such transactions to cushion the fall in sales from several blockbuster drugs which have recently lost patent protection or are about to.
But Pascal Soriot, chief executive, has strongly defended the strategy as a legitimate way to maximise value for peripheral assets and help support investment in new products.
So-called externalisation revenue more than doubled last year to $1.07bn, including $450m from Celgene of the US as an upfront payment for rights to a blood cancer drug.
Monday’s deal marks a step towards meeting AstraZeneca’s target for a further increase in so-called externalisation revenue this year. This will help soften the impact of sharply reduced sales of Crestor, the company’s best-selling cholesterol drug, which loses patent protection in the US this year, opening the way for low-cost generic competition.
Externalisation revenue has become a crucial part of Mr Soriot’s efforts to defend near-term earnings while investing enough in research and development to deliver long-term growth from new drugs.
Addressing investors in February, he pushed back against accusations that the externalisation deals amounted to “selling the family silver” to plug the near-term revenue dip. He pointed out that, in addition to upfront fees, AstraZeneca retained an economic interest in most of the assets being licensed, promising a continuous revenue stream.
“[These] are products we don’t want or cannot develop ourselves because we don’t have the capabilities . . . [or] the financial resources . . . But we want to retain some economic interest.
“We partner with someone who’s going to do a good job operationally for us and then leave us with some of the economic value.”
The deal to market Plendil in China highlights growing collaboration between western and local manufacturers in the world’s second-largest pharma market. Such agreements can help multinational groups widen their reach in China while giving local companies access to strong branded medicines.
February 29, 2016