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AZ Spins Off Anti-Infectives

Word came yesterday that AstraZeneca is spinning off its anti-infectives division into a separate subsidiary company. This does not appear to have been their first choice – they’ve been shopping these assets around for actual cash, but had no takers (at least, on their terms). Here’s what they’re telling the employees:

. . .We are creating a stand-alone subsidiary company, focused exclusively on the research and development of our early-stage antibiotic pipeline, including the novel gyrase inhibitor AZD0914, which is currently in Phase II for the treatment of gonorrhoea. AstraZeneca will invest $40 million in the new company. We anticipate that the new company will be led by and include staff from AstraZeneca’s Innovative Medicines Unit. . .
. . .As already communicated to our employees, this new way of conducting small molecule antibiotic research and early-stage development will impact approximately 95 employees based in Waltham, MA. It is anticipated that some of the researchers impacted by the changes will take up roles in the new company, or in other parts of AstraZeneca. We are fully committed to supporting our people through the transition.

FierceBiotech has more, agreeing that this seems to have been something of a last resort for the company. But it probably could have been worse, too – better a “subsidiary company” than no company at all, if you’re working there, I should think. We’ll see how this goes in the coming months. My guess is that the gyrase inhibitor’s fortunes will determine a lot of the story.

15 comments on “AZ Spins Off Anti-Infectives”

  1. kemist says:

    They hired “medicinal chemists” from temp agencies and custom synthesis shops like arqule, go figure.

  2. Anon says:

    What does AZ management gain by spinning it out as a “wholly owned” subsidiary, given that AZ still carries all the costs. Is the idea that this will eventually make external investment more forthcoming? Or that no one will notice when they drop the axe again?
    So sad to see this news, especially when other pharmas are starting to re-invest in anti-infectives.

  3. brahmin says:

    @1:
    Watch your implications. Some of the best chemists I’ve hired have been former Arqule people. Whereas I’ve come close to firing most former big pharma chemists.

  4. optmo says:

    Completely unrelated: any word on Pfizer’s cuts in the Cambridge area?

  5. Anonymous says:

    #2 – They won’t be picking up all the costs, that’s the whole idea. After the $40 M initial investment, they’re on their own. Since AZ is the sole shareholder this means that they reap 100% of the profits if any products make it to market. If they’re not profitable, they can close the whole thing down without affecting the rest of the organization. If another pharma comes forward with a buyout offer, they can sell the whole thing off in one tidy little package.

  6. Dr. Manhattan says:

    “They won’t be picking up all the costs, that’s the whole idea. After the $40 M initial investment, they’re on their own. Since AZ is the sole shareholder this means that they reap 100% of the profits if any products make it to market. ”
    Time to start writing BARDA grants, as $40 million won’t get you very far into Ph. III registration studies. Also, you better have people in the new, much smaller spin out organization with Development experience & the FDA staffers to move the compound along. As for the long term, difficult to say what direction they will need to head in for any research efforts.

  7. Anonymous says:

    #6 Hey, you’re right! Let’s just lay everyone off instead and earmark $40 M for grants.

  8. annon22 says:

    2: They can spin then off, possibly as in IPO or as a direct spin out to get some value, if there is any to have.
    Sounds a lot like the plan by GSK where the AI group has essentially be operating independently for a number of years, and is going to be offered in part as in IPO. Have to get something new and innovative, which is increasingly hard for AI areas; for GSK at least, once you get past their HIV drugs, there’s not much of value. They have lost any hope for Hep C and don’t seem to be making progress on some of the most needed ares such as resistence and c. dif. My belief is that these will have to come from biotechs with Merck being the one large drug company making investment and having suitable skill.

  9. The Italian says:

    If the new management they put in place in infection 3 years ago is in charge, the spin off won’t be around in about a year!

  10. nosehairs says:

    @#1
    I worked with some temps at AZ. they were great chemists and great people. I guarantee you they could synthesize compounds you couldn’t begin to pronounce jackass.

  11. David Cockburn says:

    Maybe AZ are hoping that a combination of liberation from big pharma bureaucracy and financial pressure to achieve will deliver results.
    Then, as 5 above says, they can sell off as a package, or close it in the case of failure.

  12. DrSnowboard says:

    Are you able to write-off cash injected into ‘spinouts’ against tax? Does it appear on a different part of the company balance sheet? That’s as far as AZ’s forward planning probably extends. I hope they are able to contract to whoever they like, rather than use the AZ internal resource as their priority will be zilch and their ability to push water uphill severely reduced.

  13. Anonymous says:

    My cynical side says this is a CYA move. Oh, sorry, Company X isn’t liable for the environmental cleanup costs at Subsidiary Y. Kind of like how Union Carbide still technically exists as a Dow subsidiary.

  14. The Italian says:

    @ #10 Exactly!

  15. Sine Nomine says:

    “Maybe AZ are hoping that a combination of liberation from big pharma bureaucracy and financial pressure to achieve will deliver results.”
    The group being spun off will have one reasonable asset, AZD 0914, which was discovered & developed internally prior to the arrival of the (Pfizer) management. This is currently in Ph.II transitioning to Ph. III. But, it will be interesting to see what the long term strategy (if there even is one) is to keep the group running. My understanding is that there will be virtually no discovery effort going on, so it is unclear how long they will be able to sustain themselves. Remember, this was shopped around for a year by AZ with no takers.

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