- Activist investor Elliott Advisors on Tuesday renewed its calls for Alexion Pharmaceuticals to solicit buyout bids from larger drugmakers, saying decisions by the current management and board have led to the destruction of shareholder value.
- In a letter to Alexion chairman David Brennan, the hedge fund said the Portola acquisition announced last week "offers the latest evidence in support of our view that the Board is taking Alexion in the wrong direction." Shares fell 5% following the deal's announcement.
- The letter comes five months after the Alexion board and management's rejection in December of an earlier call by Elliott to sell, at which time the company contended its strategy of switching patients from an aging product to a newer one would drive more value than an acquisition would.
Alexion is facing a problem common in biotech and pharma: namely, what to do when your biggest seller faces looming competition.
The Massachusetts-based company's mainstay product has been Soliris — once the most expensive drug in the world — which treats an ultra-rare condition called paroxysmal nocturnal hemoglobinuria. Alexion could face biosimilar competition in Europe in 2022 or 2023, and Amgen is challenging U.S. patents that protect exclusivity stateside until 2027.
Alexion's strategy has been two-fold. The company advanced a Soliris successor called Ultomris, which has more convenient dosing, and attempted to diversify its business and pipeline through acquisitions of companies like Synageva BioPharma, Achillion Pharmaceuticals, and now Portola.
This strategy has not satisfied Elliott, which points to Alexion's shrinking share price and market capitalization as a sign that it's been ineffective. From a record of $197 per share reached in 2015, Alexion shares have fallen in price by nearly half, trading at $104 apiece Tuesday morning.
In a statement, Alexion noted it maintains "active dialogue" with shareholders and said that it will review Elliott's letter "in due course."
Elliott's letter claims investors are skeptical of the "resilience and longevity" of the Soliris and Ultomris franchise and are therefore reluctant to buy shares.
"We believe this skepticism is unwarranted, which only underscores the depths of Alexion's trust deficit and communication problems with investors," the letter states. "This dynamic has kept many investors away as the existential debate around the Company has obscured its achievements to date and its unique strengths and positioning for the future."
The Portola transaction was among the events Elliott criticized, noting that the $1.7 billion loss in Alexion market capitalization on the day was greater than the $1.4 billion price paid for the company.
"Portola's lack of obvious strategic fit with Alexion is what drove the bulk of the market's negative reaction, in our view," the letter states. "Portola has no chronic rare-disease exposure, the core of Alexion's focus and know-how, and instead targets a broad patient population in the acute hospital setting."
Elliott added that the current economic environment should make big pharma companies interested in buying Alexion: "As has long been the case, several have a clear need to secure a more stable footing in rare disease, and they will be hard-pressed to find a more attractive profile than the one offered by Alexion."