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AstraZeneca buys MedImmune for USD 15.6bn

AstraZeneca has offered over GBP 7.5bn for US biotechnology firm MedImmune

The UK's second-largest pharmaceutical firm, AstraZeneca (AZ), has offered over USD 15bn (GBP 7.5bn) for US biotechnology firm, MedImmune.

PMLive reported last week that MedImmune put itself up for sale after shareholders brought pressure to bear. As a result, the company appointed investment bank Goldman Sachs to advise on a sale of the company.

Medimmune took the action of potentially putting itself up for sale after talks with large pharmaceutical companies and the poor performance of its share price. Possible buyers had initially included Merck, Eli Lilly, Wyeth and Abbott Laboratories.

AZ revealed it would pay USD 58.00 a share for MedImmune, which is a premium of more than 20 per cent to the firm's closing price on 20 April 2007. The UK number two added that including net cash of about USD 340m, the total purchase price was in the region of USD 15.6bn.

Shares in MedImmune increased 18 per cent to reach USD 56.47 in pre-market electronic trading on 23 April 2007. At the same time, AZ shares dropped GBP 1.21, or 4.1 per cent, to close at GBP 28.32 in London trading.

Pipeline failures prompt acquisition
A number of high-profile R&D pipeline products at AZ have experienced delays recently. Exanta (ximelagatran) for blood-clot prevention and Galida (tesaglitazar) for diabetes were the first to go after lacklustre clinical trials. Later in October 2006, stroke treatment NXY-059 failed in late stage trials and the company had to pull out of its partnership with AtheroGenerics for heart disease treatment AGI-1067.

Adding to AZ's woes were the trial data from cholesterol-lowering drug Crestor (rosuvastatin), which produced mixed results in March 2007. The drug is used by high-risk patients, but AZ wanted to market it to patients in early stages of the condition for the prevention of arterial thickening.

The failures leave AZ dependent on its best-selling brands: Crestor; schizophrenia treatment, Seroquel (quetiapine); and antacid, Nexium (esomeprazole). MedImmune's main products to accompany the deal are the influenza nasal spray delivery product, FluMist, and infant respiratory infection treatment, Synagis, which is the company's best-selling drug, racking up FY06 sales of USD 1.1bn.

AZ's CEO, David Brennan, said: "This acquisition represents a transformational step to deliver our biologics strategy sooner than anticipated. It creates a leading fully integrated biologics and vaccines business with critical mass and enhances AZ's R&D science base through which we will deliver a stronger product pipeline."

Exclusive UK distribution deal
AZ also announced an exclusive distribution system for its medicines in the UK. Under the company's new supply system, Celesio's UK distribution unit, AAH Pharmaceuticals, and Alliance Boots' wholesale unit, UniChem, will deliver prescription medicines to doctors, pharmacies and hospitals across the country. The deal will come into effect in Q3 2007.

In March 2007, AAH was one of a group of eight wholesalers who failed to secure a High Court injunction to block US giant Pfizer's sole distribution deal with UniChem on the grounds it was anticompetitive.

Following complaints over the deal from wholesalers, doctors and pharmacists, the Office of Fair Trading (OFT) launched an inquiry into the distribution of medicines in the UK to discover how changes to distribution arrangements could impact the NHS and patients.

AZ's appointment of two wholesalers should avoid regulatory criticism and reduce the threat of generic competition. An OFT spokesperson said the new agreement would be incorporated into the existing inquiry when it is published at the end of 2007.

For a financial analysis, see Malcolm's Market Eye on the following link: http://www.pmlive.com/index.cfm?advSearch=1&showArticle=1&ArticleID=5274

25th April 2007

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