Aralez Pharmaceuticals Inc. (NASDAQ:ARLZ) investors cheer the news that the drug maker will acquire the U.S. rights to Toprol-XL® (metoprolol succinate) and its Authorized Generic (AG) pursuant to an agreement entered into between AstraZeneca (NYSE:AZN) and Aralez Pharmaceuticals Trading DAC, a subsidiary of Aralez.
Aralez shares reacted to the news, rising nearly 13% in pre-market trading Tuesday.
Toprol-XL is a cardioselective beta-blocker indicated for the treatment of hypertension, alone or in combination with other antihypertensives; the long term treatment of angina pectoris and treatment of stable, symptomatic (NYHA class II or III) heart failure of specific origins. It was first approved in the U.S. in 1992. AstraZeneca recorded U.S. net revenues from Toprol-XL and its AG of $89 million and $53 million in 2015 and year-to-date June 2016, respectively. The transaction is expected to be immediately EBITDA accretive and to move profitability forward to 2017, in each case on an adjusted EBITDA basis. The transaction is expected to be completed in the fourth quarter of 2016, subject to customary closing conditions.
The agreement includes an initial upfront payment of $175 million, which will be financed through a previously committed senior secured debt facility with Deerfield Management. At closing, Aralez will also borrow funds under this credit facility to replenish $25 million that was paid from cash on hand in connection with the recently announced ZONTIVITYÒ acquisition. In addition, Deerfield has agreed to provide Aralez access to up to an additional $250 million in capital to fund future mutually agreeable acquisitions. The transaction with AstraZeneca also includes mid-teen percentage royalties and up to $48 million of potential contingent milestone payments. In connection with the Asset Purchase Agreement, at closing the parties will enter into a Supply Agreement pursuant to which AstraZeneca will continue to manufacture and supply Toprol-XL and the AG to Aralez for at least ten years, a License Agreement with respect to certain trademarks and copyrights and a Transition Services Agreement. Under the terms of the Transition Services Agreement, AstraZeneca will continue to distribute the product on behalf of Aralez for up to nine months until the product is transferred to Aralez Pharmaceuticals Trading DAC.
“We are delighted to enter into an agreement with AstraZeneca for the U.S. rights to Toprol-XL and its AG, a beta blocker that further broadens our cardiovascular portfolio and, importantly, strengthens our financial profile by generating meaningful cash, which should accelerate our profitability to 2017 on an adjusted basis in addition to offsetting launch costs for YOSPRALAÔ and ZONTIVITY,” said Adrian Adams, Chief Executive Officer of Aralez. “This transaction further reflects our ability to deliver against the expectations that we set upon the formation of Aralez that included promoting FIBRICORâ, approval and commercialization of YOSPRALA, and seizing opportunities to expand through aggressive business development and licensing as evidenced by our recent acquisition of ZONTIVITY and now Toprol-XL.” (Original Source)
On the ratings front, Aralez has been the subject of a number of recent research reports. In a report issued on September 16, Chardan analyst Keay Nakae reiterated a Buy rating on ARLZ, with a price target of $10, which represents a potential upside of 98% from where the stock is currently trading. Separately, on the same day, Guggenheim’s Louise Chen reiterated a Buy rating on the stock and has a price target of $12.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Keay Nakae and Louise Chen have a total average return of -20.8% and -10.9% respectively. Nakae has a success rate of 31% and is ranked #4029 out of 4197 analysts, while Chen has a success rate of 39% and is ranked #4012.
Aralez Pharmaceuticals, Inc. operates as a pharmaceutical company. The company focuses on developing cardiovascular and pain therapies.