So what: Facing the prospect of losing patent protection on top sellers, AstraZeneca is putting some of its cash stockpile to work to get its hands on ZS Pharma's late stage lead drug candidate, ZS-9.
ZS-9 is a therapy that is under review by the FDA for approval to treat hyperkalaemia, or unnaturally high levels of potassium that can be life-threatening.
Hyperkalaemia is most common in chronic kidney failure and chronic heart failure patients, and estimates suggest that up to 10% of hospitalized patients suffer from it. As a result, approximately 3 million people in the U.S. suffer from hyperkalaemia and thus could be at increased risk of death or organ damage.
Currently, hyperkalaemia treatment options are limited and consist primarily of methods that reduce potassium intake and boost potassium excretion. However, dietary restrictions can be onerous, and current methods of boosting excretion result in high patient discontinuation rates.
Because current treatment options are limited and ZS-9's clinical trials have shown it to be both effective and safe in kidney and heart failure patients, AstraZeneca believe that a potential approval of ZS-9 could significantly transform the standard of care in the indication.
Now what: Recently, the FDA approved Relypsa's (NASDAQ:RLYP) competing hyperkalaemia therapy, Veltassa, after trials showed that Veltassa keeps potassium levels safely in check for up to one year.
However, the FDA approval includes a black-box warning on Veltassa's label noting that Veltassa can bind to other oral medications and therefore, other oral medications shouldn't be dosed within six hours of dosing Veltassa.
Because of this warning, if the FDA approves ZS-9 and doesn't include a similar warning, then ZS-9 may have a competitive advantage over Veltassa. According to AstraZeneca, ZS-9 did not have any significant drug to drug interactions in its trials; however, we won't know for sure if the FDA includes any caveats to this on ZS-9's label until regulators issue their decision on May 26.
Regardless, if the FDA does approve ZS-9, AstraZeneca believes that ZS-9's peak annual sales could exceed $1 billion. If so, then paying $2.7 billion to get ZS-9, which is covered by patents that stretch all the way out to 2032, could prove to be a bargain.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.