AstraZeneca stock edged briefly into breakout territory on Tuesday, a day after announcing its $1.8 billion plan to acquire CinCor Pharma.
CinCor makes baxdrostat, an experimental treatment for high blood pressure. Baxdrostat has shown "compelling" results in treatment-resistant hypertension, though test results in uncontrolled hypertension were more muted, SVB Securities analyst Andrew Berens said in a note to clients.
Still, the addition of CinCor is bound to bolster AstraZeneca's cardio-renal pipeline, he said. CinCor is also testing baxdrostat in patients with primary aldosteronism — another blood pressure condition — and chronic kidney disease. Baxdrostat isn't facing the same limitations of other drugs in its class. It does not lead to high cortisol levels or hyperkalemia, high potassium in the blood.
"With the acquisition, AstraZeneca helps bolster its robust cardio-renal portfolio anchored by (its drug) Farxiga, and potentially plans to combine baxdrostat with Farxiga for cardio-renal diseases," Berens said. "The low levels of hyperkalemia associated with baxdrostat likely facilitate the combination potential with Farxiga and may provide an advantage over other treatment options."
On today's stock market, AstraZeneca stock rose 1% to close at 71.60. Earlier, shares topped a buy point at 71.80 out of a consolidation on MarketSmith.com's weekly chart. CinCor edged higher after a gain of nearly 144% when the deal was announced on Monday.
AstraZeneca Stock: Big Cardio-Renal Business
AstraZeneca's cardiovascular, renal and metabolism business generated $6.91 billion in sales during the first nine months of 2022. That accounted for 21% of the drug giant's total sales and grew 13% on a strict, as-reported basis. Farxiga, which treats diabetes, heart failure and chronic kidney disease, brought in almost half of that at $3.2 billion, soaring 49% year over year.
Berens has an outperform rating on AstraZeneca stock.
Evercore ISI analyst Umer Raffat says the deal for CinCor was a steal. CinCor had $500 million cash on its balance sheet as of Dec. 31. Further, the total $1.8 billion takeover deal includes $1.3 billion in cash. AstraZeneca also agreed to pay $10 per share of CinCor stock when the company submits baxdrostat for approval.
That's a "very reasonable valuation for a late-stage asset," he said in a note.
New Study In Uncontrolled Hypertension?
He notes CinCor was trading at an "impaired value" after muted results in uncontrolled hypertension. But Raffat thinks the drug will work for these patients. He suggests CinCor's study was flawed. Meanwhile, the bigger question is whether baxdrostat can outperform standard drugs, like spironolactone, in lowering blood pressure.
"Commercial questions around positioning vs. spironolactone are key," Raffat said. "And AstraZeneca could attempt to address them via smartly designed trials plus using AstraZeneca commercial infrastructure."
AstraZeneca stock has a strong Relative Strength Rating of 90, according to IBD Digital. This puts shares in the top 10% of all stocks when it comes to 12-month performance. Also, shares have a top 6% Composite Rating of 94 out of a best-possible 99.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
