ii view: AstraZeneca buys American drugs company CinCor

9th January 2023 11:19

Adding to existing heart and kidney treatments and sitting alongside an array of cancer drugs. We assess prospects.

Acquisition of US company CinCor Pharma

ii round-up:

Pharma giant AstraZeneca (LSE:AZN) today announced the acquisition of US biopharmaceutical company CinCor for up to $1.8 billion.

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Nasdaq listed CinCor focuses on developing treatments for heart related hypertension and chronic kidney disease. Its development drug Baxdrostat is aimed at lowering blood pressure in curing treatment resistant hypertension.

AstraZeneca shares fell by 1% in UK trade having come into this latest announcement up by 40% over the last year. Rival GSK (LSE:GSK), which last year demerged its consumer healthcare business Haleon (LSE:HLN), is down around 12% over that time, while the FTSE 100 index is up by 3%.

The acquisition marks Astra’s first sizeable deal since its 2021 takeover of US rare disease treatment developer Alexion for $39 billion.

The addition of CinCor’s oral Baxdrostat treatment strengthens AstraZeneca's strategy to treat cardiorenal diseases and may also be used alongside its existing heart failure Farxiga drug.

Astra has agreed to pay $26 per CinCor share in cash plus a non-tradable contingent value right of $10 per share in cash, payable upon a specified regulatory submission of a baxdrostat product. CinCor shares have fallen by more than a quarter over the last year, hindered by a previous drug trial failure.

AstraZeneca’s fourth-quarter results are likely to be announced in February.

ii view:

Founded in 1999 through a merger, Anglo-Swedish pharmaceutical and biotechnology company AstraZeneca today operates in over 100 countries. Its core drug arenas include both Oncology or cancer treatments and drugs for Cardiovascular, Renal and Metabolism (CVRM). Other areas include treatments for Rare Diseases and Vaccines and Immune therapies.

For investors, acquisitions are not without risk, sales for Astra's emerging markets business fell during its third quarter to the end of September, and costs generally for businesses have been rising.

On the upside, progress in drug innovation and approvals has been ongoing, including recent cancer drug approvals in Japan. Cancer treatment sales accounted for over a third of overall revenues during Astra's third quarter trading period, while the dividend yield is forecast to rise to over 2%.

On balance, and with analysts estimating a fair value share price of close to £125, AstraZeneca looks to remain deserving of consideration for a place within investor portfolios.

Positives:

Cancer treatment sales now total around a third of overall sales
Acquisitions adding to diversity of drug treatments

Negatives:

Involved in various legal proceedings considered typical to its business, including litigation and government investigations
Net debt rose following the previous purchase of Alexion

The average rating of stock market analysts:

Buy

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