AstraZeneca, eyeing China growth, snags local Linzess rights from partner Ironwood

AstraZeneca has gained full rights in China to Ironwood Pharmaceuticals' Linzess. (AstraZeneca)

AstraZeneca has made no secret of its ambitions in China. In another doubling-down move there, the British drugmaker inked a deal with its former China head and snapped up full Chinese rights to Ironwood Pharmaceuticals’ irritable bowel syndrome (IBS) treatment Linzess.

In revamping the companies' 2012 marketing pact, AstraZeneca gained sole responsibility for developing, manufacturing and selling Linzess in China. Rather than sharing profits or sales with Ironwood, it will pay the smaller company $35 million in three installments between 2021 and 2024 plus royalties and up to $90 million in sales-related milestones.

“Today’s amended agreement allows us to bring this innovative medicine to patients more efficiently and will contribute further to our strong growth in this significant market,” Leon Wang, AZ’s executive vice president overseeing international markets, said in a statement.

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Linzess is the centerpiece of Ironwood, which recently spun off its R&D projects into a separate company called Cyclerion. The drug's second-quarter U.S. sales, as reported by its partner Allergan, reached $196 million on a 13% year-over-year prescription boost, Ironwood’s new CEO Mark Mallon, who joined from none other than AstraZeneca, said during an investor call in July.

Meanwhile, Astellas, which holds Japanese rights, recorded sales of 1.4 billion yen ($13 million) in the three months, a whopping 76% jump over the previous year.

China’s National Products Administration approved Linzess in January, opening up a market with an estimated 14 million IBS with constipation patients. It’s expected to be launched later this year.

RELATED: Ironwood, Allergan's new Linzess pain data could cue much-needed prescription jump

“AstraZeneca has substantial experience and capabilities in developing and commercializing medicines in China,” Mallon said in a statement. There's perhaps no better person to make that comment than Mallon, who once served as AZ's China president and would later move into Wang's current position before jumping to Ironwood.

The British drugmaker has by far the highest exposure to China among its Big Pharma peers. China accounted for 20% of the company's total second-quarter sales of $5.72 billion, a percentage that’s way above its rivals'. And even with such a large base, China has continuously delivered double-digit sales growth for AZ; in the second quarter, that number was 34%.

However, like many other multinationals, AZ is facing headwinds against its mature products as China rolls out a bulk procurement program that's slashed generic drug prices through competitive bidding. AZ won a contract for cancer drug Iressa after taking a 70%-plus discount but lost cholesterol drug Crestor to a local generic player.

RELATED: Is Pfizer's established drugs' decline in China the ‘canary in the coalmine?’

AZ’s solution is focusing on innovative treatments, which the Chinese government has started adopting more quickly and broadly. The company expects new treatments will contribute 60% of its China revenue by 2024, AZ’s Wang recently told Bloomberg.

The strategy is already working for Iressa follow-up drug Tagrisso. After nabbing a second-line lung cancer nod in mid-2017, AstraZeneca soon worked out a deal with the Chinese government to include it on the country’s National Reimbursement Drug List.

Tagrisso sales in emerging markets in the first half of 2019 more than doubled to $329 million, with “notable growth in China,” thanks to a high prevalence of EGFR mutations in the country, AZ said in its second-quarter report. Sept. 4, the drug earned the Chinese go-ahead for first-line treatment.

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