FRX Forest Road Acquisition Corp

Good news flowed in at AstraZeneca (AZN) from Europe when the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) recommended the approval of AstraZeneca’s Zinforo (ceftaroline fosamil) in the EU.

The CHMP recommended the approval of Zinforo for treating adults with complicated skin and soft tissue infections (cSSTI) or community acquired pneumonia (CAP). A final decision from the European Commission (EC) is expected in the coming months.

The positive opinion on Zinforo was based on positive data from four phase III trials - CANVAS 1 and 2 (cSSTI) and FOCUS 1 and 2 (CAP). AstraZeneca has submitted marketing applications in several countries and is planning further submissions this year for Zinforo.

We note that in 2009, Forest Laboratories (FRX) out-licensed co-exclusive development and exclusive commercial rights to Zinforo in all territories except the US, Canada and Japan. In March 2011, Forest launched its version of ceftaroline fosamil under the trade name Teflaro in the US. The company reported Teflaro sales of $22.4 million for the 12 months ending March 31, 2012.

Neutral on AstraZeneca

We are encouraged by AstraZeneca’s focus on high-potential emerging markets and are pleased with its effort to drive the bottom line through cost-cutting initiatives and share buybacks.

However, we remain concerned about the generic competition faced by the company’s key products. In 2011, the company lost revenues worth almost $2 billion to generic competition. The weak late-stage pipeline coupled with the slow Brilinta uptake also bothers us. We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

 
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