CinCor Pharma shares surge 144% on AstraZeneca deal

Through the takeover, the pharmaceutical giant will gain full global rights to CinCor’s flagship drug baxdrostat. The drug, a potential treatment for heart and kidney diseases, will kick off phase 3 trials in the first half of the 2023.

- CinCor shares surged 143.9% to $28.74 per share on Monday following the announcement

- Pharmaceutical giants are targeting biotech firms for M&A deals as their valuations have fallen

- The iShares Nasdaq US Biotechnology UCITS ETF fell 0.6% in the last month

Anglo-Swedish pharmaceutical company AstraZeneca [AZN] has agreed to acquire US biotech CinCor [CINC] for $26 a share, a 121% premium to CinCor’s value on Friday’s market close. The deal, potentially worth $1.8bn, comes less than a year after CinCor’s IPO debut.

CinCor shares surged 137.6% to $27.99 per share during premarket trading in New York on Monday after the deal was announced. By the end of the day, its share price was up a total 144%, closing at $28.74.

A non-tradable $10 per share in cash is also included in the agreement and will be paid to shareholders upon the regulatory filing of CinCor’s candidate medicine baxdrostat, which is being developed to treat cardiorenal disorders.

New clinical trials for CinCor’s flagship drug

The transaction, set to complete in the first quarter, means AstraZeneca will gain full access to the global rights of baxdrostat, a drug that reduces blood pressure in treatment-resistant hypertension, according to clinical trials. The drug could also be combined with Farxiga, AstraZeneca’s drug for chronic kidney disease, the pharmaceutical giant said.

CinCor’s shares dropped 23% in 2022 following its January IPO, where it debuted at $16 per share. It also plummeted 46.8% in a single trading session on 28 November after the company announced disappointing results from a second-phase trial of its flagship drug.

However, phase 3 trials are on track after another phase 2 trial was successful with a different test group of patients. AstraZeneca confirmed on Monday that the new trial is scheduled to begin within the first half of the new year.

Analysts see a hot 2023 for biotech deals

The announcement is the latest in a string of recent biotech deals.

Analysts expect a fair volume of M&A activity in the biotech space this year, according to the FT, as pharmaceutical giants look to snap up bargains as valuations in the sector fall. “There is growing optimism towards pharma dealmaking this year after biotech companies suffered sharp valuation slides last year, prompting the opportunity for potential buyers to pounce on M&A targets with discounted price tags,” Interactive Investor analyst Victoria Scholar wrote in a report on Monday.

One of the largest biotech deals took place in December 2022, with US-based Amgen [AMGN] acquiring Horizon Therapeutics [HZNP] for $28.3bn including debt.

Funds in focus: iShares Nasdaq US Biotechnology UCITS ETF, VanEck Biotech ETF

The iShares Nasdaq US Biotechnology UCITS ETF [BTEC] tracks biotech and pharma firms that are listed on the Nasdaq, and therefore provides exposure to biotechnology sector.

It holds AstraZeneca at 1.69%, making it the fund’s tenth-largest holding. Its largest holding is Amgen at 7.64%, and it also holds Horizon Therapeutics at 2.83%. It also includes a 0.05% weighting of CinCor. The fund is down 0.6% over the last month and down 3.47% year-over-year.

The VanEck Biotech ETF [BBH] offers concentrated exposure to US biotech firms, focusing on the industry’s 25 largest holdings, including Amgen and Moderna [MRNA]. The fund is down 1.9% over the last month, and 6.9% year-over-year.