ii view: drugs giant AstraZeneca details $1.1 billion US acquisition
Already big in cancer drug treatments and now looking to bolster its vaccination business. Buy, sell, or hold?
12th December 2023 15:56
by Keith Bowman from interactive investor
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Acquisition of US biopharmaceutical company Icosavax
ii round-up:
Drug maker AstraZeneca (LSE:AZN) today detailed the acquisition of US vaccine maker Icosavax Inc (NASDAQ:ICVX) for up to $1.1 billion (£876 million).
The US acquisition builds on AstraZeneca’s own expertise in respiratory syncytial virus (RSV), strengthening its vaccines and immune therapies late-stage pipeline with Icosavax's own lead investigational vaccine candidate, IVX-A12.
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Shares for AstraZeneca and maker of a Covid-19 vaccine rose by close to 1% in UK trading having come into this latest news down by around a tenth over the last year. That’s similar to fellow Covid treatment maker Gilead Sciences Inc (NASDAQ:GILD) and in contrast to a near 2% gain for the FTSE 100 index over that time.
Icosavax's phrase III-ready IVX-A12 vaccine uses a new innovative protein virus-like particle platform to target both RSV and human metapneumovirus (hMPV), both common conditions in hospitalising the over 60s and chronically ill.
The building of AstraZeneca’s vaccine and immune therapies business adds to its existing strengths across cancer treatments, cardiovascular, renal and metabolism conditions, and rare diseases.
AstraZeneca executive Iskra Reic said: “This virus-like particle vaccine technology has the potential to transform prevention against severe infectious diseases, including RSV and hMPV.”
The FTSE 100 giant is looking to acquire all Icosavax's outstanding shares for $15 per share, a 43% premium to Icosavax's closing price on 11 December 2023.
AstraZeneca’s Q4 and full-year 2023 results are likely to be announced in early February.
ii view:
Founded in 1999 through a merger, Anglo-Swedish pharmaceutical and biotechnology company AstraZeneca today operates in more than 100 countries. The US in 2022 generated its biggest slug of sales at almost two-fifths, followed by China at just over a tenth, and Japan at just under a tenth.
For investors, sales of its Covid-related products have in recent quarters been retreating. Acquisitions such as this latest one and its previous $1.8 billion purchase of heart hypertension specialist CinCor are not without risk. Required investment costs in drug development are likely to continue weighing on earnings, while shares for rival GSK (LSE:GSK) currently sit on an estimated future dividend yield of around 4% compared to 2.4% at AstraZeneca.
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On the upside, its push to develop new treatments includes over 150 investigational therapies in varied stages of clinical development. Cancer treatment sales accounted for just over a third of total revenues during its 2022 financial year, while its 2021 takeover of US company Alexion expanded its portfolio of drugs into the rare disease arena.
On balance, and with analysts estimating a fair value share price of over £130, this FTSE 100 pharma giant looks to remain deserving of its place in many investor portfolios.
Positives:
- Cancer treatment sales now total just over 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
- Currency movements can hinder
The average rating of stock market analysts:
Buy
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