ZS Pharma bought by AstraZeneca for $2.7B
Updated: Oct 22, 2020
The global drugmaker AstraZeneca said Friday that it has a definitive agreement to buy the former North Texas startup ZS Pharma for $2.7 billion. The deal marks a stellar rise for the biopharmaceutical company, which got an early assist from state’s tech fund and a Fort Worth technology incubator.
ZS Pharma, which is now based in San Mateo, Calif., and has offices in Coppell, uses a proprietary technology called ion-trap to develop treatments for high potassium levels in the bloodstream. The serious condition, called hyperkalemia, is typically associated with chronic kidney disease and chronic heart failure. It affects an estimated 3 million people in the U.S.
The hyperkalemia treatment, which uses the potassium-binding compound ZS-9, is under review by the Food and Drug Administration, with a decision expected by late May.
ZS Pharma is one of two key players in the field, experts said. They see a “very high probability” of approval, noting that competitor Relypsa’s Veltassa drug was approved last month. That no doubt gave U.K.-based AstraZeneca an increased comfort level.
Current estimates for global peak year sales of ZS-9 exceed $1 billion, AstraZeneca said. That fact alone helped Wall Street look past a net loss for the quarter that ended June 30 of $32.6 million, double the year-earlier loss.
In a note to investors, CitiGroup analyst Yigal Nochomovitz said he sees ZS-9 and Veltassa each achieving peak U.S. sales of about $1 billion by 2023. AstraZeneca sees ZS-9 as the “potential best-in-class” option, meaning it could take the lion’s share of the market.
AstraZeneca will acquire all of the outstanding stock of ZS Pharma for $90 a share in an all-cash transaction.
ZS Pharma, which was a Tech Fort Worth incubator company in 2009, is one of the success stories from former Gov. Rick Perry’s Texas Emerging Technology Fund, a taxpayer-funded vehicle that invests in early-stage startups.
It has been a hot commodity for months. In September, its shares jumped 28 percent after Bloomberg News reported that that Swiss drugmaker Actelion Ltd. had made a preliminary offer valuing the company at about $2.5 billion. ZS Pharma shares have risen more than fourfold since the company’s $18-a-share initial public offering last year.
In September, an analyst at William Blair & Co. said the bidding for ZS Pharma could reach $110 a share, with other potential suitors including Novartis AG and Amgen Inc., according to Bloomberg.
“ZS Pharma represents a strong fit with AstraZeneca’s pipeline and portfolio in cardiovascular and metabolic disease, one of the company’s three main therapy areas,” AstraZeneca said in a statement. “AstraZeneca’s strategy focuses on reducing morbidity, mortality and organ damage by addressing multiple risk factors across cardiovascular disease, diabetes and chronic kidney disease.
“ZS-9 complements the company’s increasing focus” on chronic kidney disease and chronic heart failure, the company said.
ZS Pharma, which will become a wholly-owned subsidiary of AstraZeneca, has about 200 employees in California, Coppell and Colorado. As of earlier this year, it had 70 employees working in 26,000 square feet in Coppell, according to published reports.
“This agreement will allow us to maximize the potential of ZS-9, drawing on AstraZeneca’s long-standing expertise in developing and commercializing medicines for cardiovascular and metabolic diseases,” Robert Alexander, chief executive of ZS Pharma, said in a statement.
AstraZeneca posted weaker profit in April as sales of two of its best-selling products — the acid reflux drug Nexium and the cholesterol pill Crestor — slip as patents expire.
The deal also helps AstraZeneca to bulk up. Last year AstraZeneca fended off a takeover bid from Pfizer, a deal that would have created the world’s largest drug company.
The ZS Pharma transaction is expected to close by the end of this year.
ZS Pharma received $2 million from the state in 2010 under the Emerging Technology Fund and began trading in June 2014 in an initial public offering that raised more than $106 million. It was the first Texas-based biotech IPO in more than a decade. The company raised an additional $174 million in a March share sale.
Founded in 2008, the company moved from Indiana to Fort Worth to work with Tech Fort Worth, the technology incubator. Co-founders Al Guillem and Jeffrey Keyser together have more than 60 years of experience in the pharmaceutical industry, according to the company.
Guillem and Keyser began their careers in the pharmaceutical industry with Adams Laboratories in Fort Worth, where they worked on the development of the expectorant Mucinex, according to published reports.