Why ZS Pharma Isn't Game-Changing For AstraZeneca

• AstraZeneca plc (ADR) AZN shares have been volatile in 2015 and are down 7 percent year-to-date.
• Morgan Stanley’s Nicolas Guyon-Gellin maintained an Underweight rating on the company.
• AstraZeneca needs to execute its immune oncology pipeline well, since its proposed acquisition is unlikely to have a significant impact in the near term, Guyon-Gellin stated.

AstraZeneca has announced plans to acquire of ZS Pharma Inc ZSPH for $2.7 billion in an all-cash deal. The proposed transaction is expected to have no impact on AstraZeneca’s 2015 results, be minimally earnings dilutive in 2016 and 2017 and be accretive from 2018 onwards.

Analyst Nicolas Guyon-Gellin believes that the acquisition price is appropriate in view of the anticipated peak sales of $1bn for ZS Pharma's key product, ZS-9. He added that the acquisition is a strategic fit for AstraZeneca and would complement the company’s CV metabolic and nephrology platform.

Morgan Stanley’s US biotech team views ZS-9 as a potential best-in-class treatment for hyperkalemia, based on its rapid onset of action and the planned retail distribution model and reasonable manufacturing costs.

On November 7, ZS Pharma is scheduled to provide long term data for ZS-9 from around 700 of 750 patients enrolled in the '005 trial, with exposures varying up to one year duration.

Guyon-Gellin believes that AstraZeneca’s immuno oncology pipeline needs to be executed efficiently to relieve the pressures from increasing competition and factors restricting the performance of various growth platforms. He also questioned the long-term sustainability of AstraZeneca’s policy of funding R&D expenses by selling assets.