Boost for Astra as pill deal sealed with rival

Embattled AstraZeneca – the UK’s second-biggest pharmaceuticals group – will receive 250 million US dollars (£159.3m) upfront after giving Pfizer exclusive global marketing rights for the over-the-counter (OTC) version of acid reflux treatment Nexium.

Astra will also be eligible to get milestone and royalty payments from Pfizer based on product launches and sales of the OTC medication.

Cheshire-based Astra said the deal would increase its 2012 earnings per share target.

The deal comes at a welcome time for Astra, which has been suffering from plunging sales and profits amid competition from cheaper generic drugs and challenging market conditions.

It recently revealed that half-year profits slumped by a quarter after a 16 per cent slide in sales in the six months to June 30.

Nexium – launched in Europe in 2000 and in 2001 in the US – has been a star performer for the group, but it has also been hit by generic competition and saw revenues fall 13 per cent in the second quarter.

Astra, which will continue to manufacture and market the prescription version of Nexium, said the deal with Pfizer will help it “realise the substantial, long-term value of this brand”.

It is also working with Pfizer on similar potential deals for other OTC versions of its drugs, such as hay fever and dust mite allergy treatment Rhinocort Aqua.

Astra has had a tough year and its chief executive David Brennan quit in June following shareholder pressure over profit warnings and poor performance.

The group is slashing jobs and cutting costs to offset poor performance, having announced its intention to axe 7,300 roles in February.

Pfizer said it expects to begin marketing OTC Nexium in 2014, which is also when the drug’s prescription version loses patent protection.

The company said a marketing application for Nexium’s over-the-counter version was filed with European health regulators in June. The application for US approval is expected to be filed in the first half of 2013.

The US drugmaker also cut its full-year profit forecast to reflect the impact of the deal and said it expects to spend more on research and development.

Pfizer expects full-year 2012 research and development expenses of between $6.75 and $7.25 bn, up from its prior range of $6.5 to $7.0bn.