AstraZeneca (AZN) is a global biopharmaceutical company. AstraZeneca’s products include Crestor, Atacand, Seloken/Toprol-XL, Plendil, Onglyza, Zestril, Symbicort and Zoladex. The company owns and operates a range of research and development (R&D), production and marketing facilities worldwide. AstraZeneca operates in over 100 countries, including China, Mexico, Brazil and Russia.
Focus on the Diabetes Segment
For AstraZeneca, its diabetes business grew 60% in the third quarter of fiscal 2013 and contributed to overall growth of 8%. The diabetes franchise made $206 million. U.S. health regulators approved an AstraZeneca drug from a new class of medicines to treat type 2 diabetes after previously rejecting it over safety concerns. The medicine was co-developed by Bristol-Myers Squibb Co. (BMY) and AstraZeneca. AstraZeneca late last year bought out Bristol's stake in its diabetes joint venture for more than $4 billion, including up-front and sales-related milestone payments.
Farxiga, which has already been available in Europe, belongs to a class of diabetes drugs called SGLT-2 inhibitors that work by blocking reabsorption of glucose by the kidney and increasing its excretion through urine to lower levels of blood sugar.
It will compete with a similar drug from Johnson & Johnson (JNJ) called Invokana, as well as diabetes medicines from other classes.
Details of the Drug
"Farxiga provides an additional treatment option for millions of Americans with type 2 diabetes," Curtis Rosebraugh, of the FDA's Center for Drug Evaluation and Research, said in a statement. The FDA had initially rejected the Astra and Bristol-Myers drug in early 2012 over concerns about possible cancer and heart risks. The companies provided additional data that addressed those concerns to the satisfaction of the advisory panel and the agency.
Still, as a condition of approval, the FDA is requiring six post-marketing studies, including a cardiovascular outcomes trial to make sure the medicine does not increase the risk of heart attacks in patients deemed at high risk of heart disease, and a study to assess bladder cancer risk. The FDA-approved label for Farxiga says the drug should not be used in patients who also have kidney disease or who are being treated for bladder cancer.
The innovation is the latest in AstraZeneca's efforts to invest heavily in emerging treatments for diabetes – a disease that represents a $465 billion market. A growing epidemic, diabetes is projected to affect 550 million people worldwide by 2030.
AstraZeneca has made acquisitions and forged collaborations with other companies that have promising drugs in their developmental pipelines. Diabetes represents an important strategic area in returning AstraZeneca to growth as it works to offset losses from patent expirations on key medicines.
Under the terms, the firm agreed to pay Bristol-Myers Squibb $2.7 billion and up to $1.4 billion in regulatory, launch and sales payments, as well as other sales royalty payments up to 2025.
A relatively new diabetes drug, Symlin (pramlintide), developed by AstraZeneca's Amylin Pharmaceuticals has been found to combat a major component of Alzheimer's disease and may offer a new treatment option for the millions of Americans with the memory-robbing condition. It is a degenerative brain disease that slowly destroys memory and thinking skills and eventually destroys the ability to carry out the simplest tasks. Today there are 5 million suffers in the U.S. with this disease and there is no effective treatment, and the cost of caring for the patients is over $100 billion per year; $6 billion of those dollar are on drugs that only treat the symptoms.
Symlin allows patients to use less insulin, lowers average blood sugar levels, and substantially reduces what otherwise would be a large unhealthy rise in blood sugar that occurs in diabetics right after eating. Other than insulin analogs, Symlin is the only drug approved by the FDA to lower blood sugar in type 1 diabetics. Symlin, taken as an injection at mealtime, was approved in 2005 by the FDA for Type 1 and Type 2 Diabetics who use insulin. It is an antihyperglycemic agent which mimics the activity of amylin, a naturally occurring hormone which is secreted together with insulin and is involved in post-prandial glucose control.
The potential market for type 2 diabetes treatments is enormous despite a crowded field with many medicines from several different classes from which to choose. An estimated 90 percent to 95 percent of the more than 370 million people living with diabetes worldwide have type 2, according to the International Diabetes Federation.
While the diabetes market is enormous and expected to reach over $55 billion in 2017, it is also one of the most competitive. Over 25 million Americans suffer from the disease, and 350 people million suffer worldwide. AstraZeneca has a market cap of $81.18 billion. Its stock has risen almost 10% YTD, closing on March 25 at $64.38 per share. It offers one of the best dividends available at $1.90 per share and has a yield of 4.33%. It therefore may create shareholder returns.