One week after pulling the plug on one of its few late-stage assets, AstraZeneca PLC has announced its intentions to acquire Pearl Therapeutics Inc. to get access to its late-stage chronic obstructive pulmonary disease treatment and its early-stage respiratory pipeline. The deal pleases analysts by fleshing out the larger company’s pipeline, but is still only a small step in its revitalization.

The British pharma announced June 10 that it will pay $560 million upfront, as well as $450 million in development and regulatory milestones related to early-stage pipeline assets to acquire all shares of privately-held Pearl. Pearl shareholders are also eligible to receive $140 million in milestones related to sales of the lead pipeline candidate; bringing the total deal value to $1.15 billion. The transaction is expected to close in the third quarter.

The deal is based around Pearl’s late-stage COPD drug PT003, which began an extensive Phase III program in May. According to Lyn Baranowski, head of Pearl’s business development, 59 patients have been screened so far and randomization has begun. The Phase III program will include approximately 2,700 patients at an estimated 260 clinical sites in the U.S., Canada, Australia, and New Zealand across two trials.

Pearl met with FDA in late-2012 for an end-of-Phase II meeting where it finalized trials design and dosing with the regulatory agency. The companies expect to file for approval of the compound in the first-half of 2015. AstraZeneca said it intends to keep the structure and staff of Pearl intact and will make few changes to the clinical program once it takes over upon the closing of the deal. The Redwood City, Calif.-based biotech has used the $167 million it has raised through four rounds of financing to get the drug to this point. 5AM Ventures, Clarus Ventures, New Leaf Venture Partners, and Vatera Healthcare Partners have all been investors in the company ([A#14121113002]).

PT003 is a fixed-dose combination of glycopyrrolate, a long-acting muscarinic antagonist (LAMA), and formoterol, a long-acting beta-2-agonist (LABA). Phase II clinical data showed that PT003 was superior when compared with the current market leader, Pfizer Inc./Boehringer Ingelheim GMBH’s Spiriva HandiHaler (tiotropium bromide), as well as with Merck & Co. Inc.‘s Foradil Aerolizer (formoterol fumarate). PT003 uses a pressurized meter-dose inhaler (pMDI) as a delivery device for the combo drug. Since MDI technology is already used with other medications, the company will not have to seek regulatory approval for the device as well. This will allow the company to bypass educating doctors and patients about the use of the device. Baranowski also explains that the device gives patients more ease of use because, unlike dry-powdered inhalers, the pMDI device does not require patients to take a large inhalation when taking the medication.

PT003 is dosed twice daily, which Baranowski explained is an ideal schedule due to the spike in symptoms that COPD patients usually experience in the morning and at night. Pearl also has two monotherapies – the LABA and LAMA active agents combined in PT003 – in development as well as two corticosteroid combination therapies further back in the pipeline. The monotherapies work individually as COPD therapies and could offer alternatives to the treatments currently on the market.

Why Pearl Shines In AZ’s Eyes

“Since Pascal [Soriot]’s arrival last October, we have done a strategy refresh and signaled three areas as priorities, including respiratory and inflammation, which has given us a much more focused approach for our resources,” said Shaun Grady, AZ’s VP of business development. “Pearl reinforces our pipeline and portfolio.”

There were three characteristics that attracted the British pharma to the biotech, said Grady: PT003, its technology platform that allows for more stable co-suspensions, and a triple drug combination that is currently in early stages.

“The acquisition of Pearl Therapeutics is a good move for the company as it gives AstraZeneca access to the new class (LABA/LAMA) of respiratory drugs expected to become the next cornerstone treatment for COPD,” wrote Helvea analyst Odile Rundquist.

The triple drug combination includes a LAMA, a LABA, and an inhaled corticosteroid (ICS); these types of drugs are expected to play a major role in the future respiratory market, which is currently worth about $20 billion and is dominated by GlaxoSmithKline PLC Also see "COPD Market Snapshot: New Products, Limited Differentiation" - Pink Sheet, 6 May, 2013.. The triple drug combo is currently in pre-clinical testing, but is expected to enter Phase II testing immediately.

“AstraZeneca’s lack of play in triple therapy has been a key concern for a while and today’s announcement should fix that,” wrote Panmure analyst Savvas Neophytou in a note to investors. “AstraZeneca’s respiratory business corresponds to some 16% of revenues and its pipeline was threadbare in our view. Today’s acquisition does not result in changes to forecasts but with one big hole plugged, we are warming to the story once more.”

The acquisition of Pearl comes at a good time for AstraZeneca. The company and its partner Rigel Pharmaceuticals Inc. announced June 4 that fostamatinib, an oral spleen tyrosine kinase (SYK) inhibitor, showed mixed results in two recently reported Phase III studies for rheumatoid arthritis, resulting in AZ pulling out of the partnership Also see "Lackluster Fostamatinib Results Prompt AstraZeneca To Drop Rigel Deal" - Pink Sheet, 4 June, 2013.. AstraZeneca is still partnered with Rigel for its early-stage inhaled JAK inhibitor against asthma.

AstraZeneca has been building out its pipeline through licensing deals over the last few years, trying to replace revenues lost from key products that went generic and in preparation for the upcoming expiration of Crestor (rosuvastatin) patents Also see "AZ’s Make Or Break Moment Comes Down To Business Development" - In Vivo, 17 April, 2013.. CEO Pascal Soriot has been trying to refocus the company on areas of high unmet medical need since he took over the top slot, and much of the M&A that has been conducted under his watch has been for early-stage compounds.

The big pharma is one of the few that still faces a steep patent cliff, and it has suffered a string of late-stage development disappointments, including fostamatinib.

AZ Centers Pearl As The Jewel Of Its Respiratory Franchise

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