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AstraZeneca buys U.S. lung drug firm Pearl for up to $1.15 billion

By Ben Hirschler

LONDON (Reuters) - AstraZeneca is to buy U.S. respiratory drug specialist Pearl Therapeutics for up to $1.15 billion as Britain's second biggest drugmaker steps up a drive to rebuild its product pipeline via deal-making.

The acquisition of the privately held company secures AstraZeneca a position in the emerging market for a new class of lung treatments known as LABA/LAMA drugs that promise improved patient compliance and disease control, without steroids.

Some industry analysts believe that LABA/LAMA inhalers are set to dominate future therapy for chronic obstructive pulmonary disease (COPD), which causes debilitating breathlessness and affects an estimated 210 million people worldwide.

Buying Redwood City, California-based Pearl fills a gap in AstraZeneca's respiratory portfolio, although it will still be behind rivals including GlaxoSmithKline and Novartis in the race to develop the new type of inhaled drug.

AstraZeneca said on Monday it will pay an initial $560 million plus up to $450 million if certain development milestones are hit as well as sales-related payments of up to a further $140 million.

The transaction is an important bet by new chief executive Pascal Soriot, who took over last October, on the British company's respiratory business, which he has identified as a core therapy area.

AstraZeneca's sales and profits are falling as older medicines lose patent protection and the company badly needs new products to replace former big sellers like the antipsychotic Seroquel, which lost exclusivity last year.

The deal is Soriot's second bolt-on acquisition in two weeks, following an agreement to buy Omthera Pharmaceuticals for as much as $443 million to build up its cardiovascular drug business.

LATE TO MARKET

AstraZeneca already has a successful existing inhaled respiratory drug in Symbicort but had risked losing out in the long term by not having a LABA/LAMA inhaler.

Pearl's lead product, PT003 is in final-stage Phase III clinical trials and is a fixed-dose combination of formoterol fumarate, a long-acting beta-2-agonist (LABA) and glycopyrrolate, a long-acting muscarinic antagonist (LAMA).

It also has another product called PT010 that is a triple-combination medicine, combining the LAMA and LABA components of PT003 with an inhaled corticosteroid. AstraZeneca said this triple combination drug could be accelerated into Phase II clinical development.

Industry analysts at Berenberg Bank said PT003 would be late to market, with Novartis likely gaining first regulatory approval for its LABA/LAMA product in Europe later this year, with GSK not far behind in the Europe and the United States.

Germany's Boehringer Ingelheim and Forest Laboratories, working with Almirall, should also complete their Phase III programs before the end of this year, ahead of PT003, making AstraZeneca potentially fifth to market.

PT003 is also taken twice-daily, rather than once a day for some competitors, but AstraZeneca hopes Pearl's pressurized metered dose inhaler device may give it an edge.

Berenberg said the greatest upside from the Pearl deal could come from the triple combination product, where AstraZeneca may be second to market, behind GSK.

The acquisition, which is expected to close in the third quarter of 2013, will have no impact on AstraZeneca's financial guidance for the year, the drugmaker said.

Pearl's backers, who stand to gain from the sale, include 5AM Ventures, Clarus Ventures, New Leaf Ventures and Vatera Healthcare Partners.

(Editing by Paul Sandle and Greg Mahlich)

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