As expected, AstraZeneca has confirmed that it is selling its Swedish dental and medical devices unit Astra Tech to US group DENTSPLY for around $1.8 billion in cash.
Astra Tech develops, manufactures and markets dental implants, customised implant abutments and consumable medical devices in the urology and surgery markets, and the group pulled in worldwide sales of $535 million last year.
According to DENTSPLY, the transaction throws together "two of the fastest growing dental implant businesses, creating a strong global competitor with a number three market position", and the move is expected to be immediately accretive to its earnings.
The Anglo-Swedish drug giant noted that the deal is expected to close during the second half of the year, subject to regulatory clearances, but added that there will be no impact on its full-year guidance for core earnings per share for 2011, the gain being recorded under 'other operating income' instead.
David Brennan, AstraZeneca's chief executive, said the deal represents "an excellent outcome" for the company's shareholders. But reaction elsewhere was also lukewarm, particularly with regard to its potential to help AstraZeneca overcome its future woes.
Buy and reduce
Matrix analyst Navid Malik issued a 'reduce' recommendation on shares, because of the remaining risks to the drugmaker's revenue line from looming patent losses.
"The company has a dearth of new products coming through its pipeline following a number of high profile product failures last year, Crestor appears to be slowing in terms of new prescription growth and the ongoing review of Brilinta by the FDA scheduled for later next month has introduced further uncertainty", he said, explaining his position.
On the other side of the fence, however, Shore Capital analyst Brian White argued in a 'buy' recommendation that "a deal at 3.4 times sales during a period in which the dental market has been relatively subdued...is a positive outcome for the company".
And while AstraZeneca has not divulged details on how proceeds from the sale will be utilised, "given the powerful cash generative ability of its operations and the timing of sale completion they could certainly augment the company's ability to continue to return cash to share holders in 2012", he noted, according to various media reports.