Overview of AstraZeneca Company
The following report is about the deal that has taken place between AstraZeneca and Aspen. These two companies have been in the medical sector or industry for a long time. The primary purpose of this report is to highlight the different factors that will emphasise on the different perspectives like the deal that has taken place between them. The critical issues that would be highlighted in this report are the global business strategies for these two companies. The agreement that has been agreed between these two companies will have the primary focus on to proceed with this report. The rationale for each of the companies would have to be measured positively. The strategic decisions that have been made by these two companies would be discussed and analyzed as well. Both the companies can learn many lessons from this deal for their future use or venture into any other agreement. The financial structuring that has been included in this issue would be adequately discussed. The economic analysis will be highlighted for both the companies respectively. This would probably bring out the need for making this deal correctly. The possible challenges that the companies might go through would also be discussed in this paper. These issues are indeed significant and essential for the betterment of these two organizations. The deal will be structured by finance in the following sections. The global strategies would also be discussed in this matter.
AstraZeneca is an organization that works in the pharmaceutical biotechnology industry. The headquarters of this company is at Cambridge in England. The company sells various pharmaceutical products (Astrazeneca.com, 2018). This company serves the global area. They have also opened a centre in Sweden for the proper research’on the chemical drugs. They provide individual products on anesthetics, cardiovascular, diabetes, gastrointestinal, oncology and other infectious diseases. They also sell the orphan drugs. Therefore, the organization has a good stock exchange value depended on their market value. It has been considered as one of the largest drug selling companies based on their sales revenue (Astrazeneca.com, 2018).
The full name for Aspen is American Society for Parenteral and Enteral Nutrition (Aspenpharma.com, 2018). This is one of the most professional organizations in the USA that has contributed to provide the clinical help in the nutritional contexts to patients. They want to improve the quality of care to be developed to the patients by utilizing the advancement of medical science and following the attributes of clinical nutrition (Aspenpharma.com, 2018). Very recently, Aspen and AstraZeneca have gone through an agreement.
Overview of Aspen Company
Aspen and AstraZeneca have been the two leading companies in the medical industry providing to the critical care of the patients. The deal that has been sealed between the two organizations will have significant implications leading them to the success. This deal will enhance will also enhance the global business strategies that would be very much important for the organization. This will also be important for identifying the challenges that would be important for them to overcome and pose a real problem before their competitors. The agreement has been done between the two organizations on the commercialization process for the anesthetic medicines outside the borders of USA (DiMasi, Grabowski & Hansen, 2016). AstraZeneca announced that they had agreed with the Aspen Global Incorporated (AGI).They constitute a significant part of the Aspen group. This means that Aspen would hold all the residual rights for the sale of the anesthetic medicines that are formed of things like Diprivan, EMLA, Carbocaine, Citanest and others.
Under this agreement with AstraZeneca, AGI got all the rights for the commercialization of the medicines that would be sold outside the USA. Many financial considerations had been attributed in this context as well (Khanna, 2012). One of those contexts has been AGI will have to pay AstraZeneca around $211 million for the performance-related issues that would be based on the sales and gross margin between the timeline of 1st September 2017 to 30th November 2019. Another instance in this financial consideration would be the fact that AGI would have all the remaining rights to the intellectual property and manufacturing process of the anesthetic medicines for a deal worth of $555 million. This deal will be very much helpful for both the companies as they will benefit by increasing the performance efficiency for the companies. Thus AstraZeneca would carry on their focusing to the three principal therapy areas (Khanna, 2012).
Some other important issues and factors would also be discussed in this regard as well. The problems are AGI would not need to pay any royalties to AstraZeneca after the signing of this deal. AstraZeneca would thus be liable for the transition of the manufacturing process of anesthetic medicines (Comanor & Scherer, 2013). Thus they would supply all the medication to the AGI. The ongoing interest in the organization would be decreased as well. This deal will have further implications for both the companies as well. It would be regarding their financial performance and their strategic decisions as well. As AstraZeneca develops the medicines on different categories, they will require discovering the critical components that would be very important for them (Comanor & Scherer, 2013).
The Deal between AstraZeneca and Aspen
The three therapy areas that have been discovered are the cardiovascular, oncology and metabolic diseases and discovery. A very positive aspect in measuring the brand value of AstraZeneca is the fact that they operate in more than 100 countries and the medicines prepared by them are very much innovative (Haucap & Stiebale, 2016). This is why many patients always prefer the drugs discovered and developed by AstraZeneca. This deal with AGI will help them to reach to more patients. It has been noted that the AGI has an excellent commercial network. This will help them to sell the innovative medicines all over the world. AGI will provide an excellent point of getting the maximum selling value of the anesthetic medicines all over. Astrazeneca will continue to supply the anesthetic medicines to AGI for the coming five years (Guler & Nerkar, 2012).
This deal might have many positive points that could be seen as the benefits. These benefits will positively impact on both the companies such as AGI and AstraZeneca. AstraZeneca had confirmed the selling of the anesthetics portfolio to Durban based company Aspen for an amount of $766 million.
This deal will enable AstraZeneca to reach to the people of over 100 countries. Thus their medicines would be taken by millions of patients and increase their brand value (Schuhmacher et al., 2013).
AstraZeneca would be focusing on the three departments of oncology, cardiovascular and metabolic diseases. Thus the patients suffering from these diseases would be benefitted a lot since no proper medicine is available in the market for cancer and cardiovascular treatments.
- They have sold the remaining portfolio rights for the selling of the medication in those three areas.
- AstraZeneca would be benefitted from the financial aspects as well because Aspen would pay them additional $211 million alongside the $555 million.
- All the patients suffering from cancer and cardiac problems would be primarily benefitted from this deal as well (Schuhmacher et al., 2013).
- The commercial network of Aspen will provide AstraZeneca to evolve with new medicines and provide it for the welfare of the patients.
Astrazeneca and Aspen might face some challenges in the discourse of this deal as well. These challenges can be the following:-
- The commercial rights of the company AstraZeneca would thus be no longer applicable.
- Both the organizations will have to fulfil the requirements of the deal positively otherwise they will be in deep trouble for the legal terms (Schuhmacher et al., 2013).
- Astrazeneca will not receive the royalties, so this will be a problem for them as well.
- AstraZeneca will not be able to do any marketing campaigns for the sale of their medicines.
- Theoretical perspectives and strategies
As per the theoretical perspectives of this entire procedure, both AstraZeneca and Aspen have been benefitted a lot from this deal. Some of the strategies could be adopted in this section like the Yip’s Framework (Baroto, Abdullah & Wan, 2012). The central aspect for this is the potential for the globalization, i.e. globalizing the medicines for the betterment of the patients. The government drivers will be useful in this business like the governments of the target countries in which the medication would be sold. The cost drivers would be the strategies by which Aspen will fix its costs according to the financial position of those countries (Silvey & Bakker, 2012). The political and legal guidelines will have to be maintained in the countries in which Aspen would sell the medicines. The economic and financial factors like the GDP of the country, per capita income and other factors should be kept in mind for the globalization of the medicines as well. Aspen should use the demographic elements to know the real number of patients suffering from cancer, cardiac and metabolic diseases. Thus they will be able to discover how they can cater to the needs of the patients (Silvey & Bakker, 2012).
Benefits of the Deal
Aspen should need to imply some critical strategies by adopting the short-term strategy by assessing the needs of the customers for these medicines. After this assessment, they will choose a long-term strategy if they need it (Cascio, 2018). They can seek the help of the government as well if they need any help regarding the transportation costs for the medicines. They might have to strengthen their network communication to get the better results of distributing the medication among the patients (Banker, Mashruwala & Tripathy, 2014).
Aspen will have to lower down the resource costs in the emerging countries. They must understand the common customer needs or the demands of the patients where the health system is not that good (Cascio, 2018) They should imply the global channels by which they can best support. Aspen might depend on the different components of the significant drivers of the cost of production (Barney, 2014). These are economies of scale, comparative advantage of the countries due to the production costs, the communication costs that would be on the decrease. They might use the social media platforms to get the customer attention all across the globe. Some of the trade policies that could be applied by Aspen are EU trade policy and others (Buonanno & Nugent, 2013).
Aspen must maintain the standard compatible technical standards in the world. This will be applicable for the enhancement of the distribution services of the products as well. If there are rivals from the different countries and continents, they will need to address the various strategies to overcome the challenges (Valipour, Birjandi & Honarbakhsh, 2012). Aspen should export these medicines all across the world and import foreign money which they could use to pay to AstraZeneca. Aspen might introduce the low-cost strategy or the cost leadership strategy to gain the global market indeed (Grant, 2016). The strategy that could be used by them are cost leadership, cost differentiation and require focus strategies. Aspen can administer the low cost advantage to the customers for the better sale of the medicines of AstraZeneca. Thus both AstraZeneca and Aspen could serve more significant number of customers if they can apply these strategies.
The company AstraZeneca got into an agreement with the Aspen holdings in 2016 whereby the AGI gained commercialization rights so that they could get exclusive rights to market the medicines outside the United States. This agreement certified that the AGI has acquired all rights to intellectual property and other related information about the anesthetic medicine for a deal that is close to $555 million (medicines, 2018). Along with this AGI will be paying AstraZeneca a sum of $ 211 million. This amount will be paid to it based on their achievement of the performance related milestones which will be based on their sales made and the gross margin achieved from the period of 1 September 2017 to 30th of November 2019.
Challenges for AstraZeneca and Aspen
This given merger or rather the deal has a transition period of over five years. Under the given deal made in 2016, AGI made a payment of $520 million to Astra Zeneca and agreed to make a payment of $250 million after which a double digit royalty bonus on the sales of the product which will be made (Aspenpharma.com, 2018). Furthermore, AstraZeneca also agreed to manufacture and supply the medicines to the Aspen holding on a cost plus incentive basis for an initial period of 10 years.
The given new agreement will have no impact on the Product sales related payment of $150 million as all contingencies have been met with. The given income earned, will be recorded as the revenue of externalization in the financial statements of the company which will be made in the third quarter of 2017.
A new agreement with respect to the AGI and AstraZeneca will become effective where the Aspen Holdings will not be paying any royalty to the firm and the remaining payment of $100 million Product Sales which follows from the original agreement between the two parties will be made in 2018 to AstraZeneca (Bowker & Gokhale, 2018). The new agreement also states that if all contingencies are met with then it will be recorded as Operating Income in order to reduce the interest on the medicines which is the result of the new agreement which was formed between the given parties.
Moreover, as the firm AstraZeneca will be making the transition of the manufacture and supply of the other medicines to Aspens, it will now pay a reduced interest and as a result of the new agreement the $555 million sum and the sales based $ 211 million related payment will now be recorded under the Other Operating Income category in the Company`s financial statement. The financial guidance of AstraZeneca has not been affected for 2017.
Based on the terms of agreement and the current cost of funding of the Aspen holdings, the company`s interest in the given portfolio deal had the capability to generate a profit before tax of $100 million. According to PMLive (2018), the Aspen Holdings investment will be sourced from new debt facilities which have been secured by the firm.
Conclusion
This paper can be concluded by saying that the deal between the two companies Astrazeneca and Aspen has been a very beneficial contract indeed. It is because this deal has catered to the needs of several patients. Aspen will really be able to distribute the medicines created by Astrazeneca in many target countries. Thus they will be gain to more customers and both the companies can gain the profits. This will really be beneficial for the patients as they will be able to get the medicine at lower prices because of the low cost strategies adopted by Aspen. The financial analysis will help the readers to understand the real implications behind this deal.
References
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medicines, A. (2018). AstraZeneca and Aspen enter agreement for remaining rights to anaesthetics medicines. Astrazeneca.com. Retrieved 16 April 2018, from https://www.astrazeneca.com/media-centre/press-releases/2017/astrazeneca-and-aspen-enter-agreement-for-remaining-rights-to-anaesthetics-medicines14092017.html
PMLive. (2018). AstraZeneca sells rights to seven anaesthetics in $770m deal. Retrieved 16 April 2018, from https://www.pmlive.com/pharma_news/astrazeneca_sells_rights_to_seven_anaesthetics_in_$770m_deal_1037416
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