- In the biggest biopharma deal this year, AstraZeneca has agreed to acquire Alexion Pharmaceuticals, a Boston-based company specializing in rare disease drugs, for $39 billion.
- The deal, which is expected to close sometime between July and September, would have AstraZeneca hand over $60 in cash and roughly 2.1 American Depositary Shares — each one-half the value of an ordinary AstraZeneca share — for every share of Alexion. Using an average price of $54.14 per ADR, the deal implies a value of $175 for each Alexion share.
- Founded in the early 1990s, Alexion today is best known for high-priced treatments for uncommon illnesses. The biotech has five marketed products, including one from its recent buyout of Portola Pharmaceuticals. Acquiring Alexion helps to diversify AstraZeneca, which has been growing mostly because of newer drugs for cancer and diabetes.
Once overlooked, rare diseases have become a major area of interest for large pharmaceutical companies. These illnesses typically have few, if any, treatment options, meaning any effective therapy brought to market faces little competition and can often be sold at a high price.
That was the case with Alexion's first product, Soliris, which in 2007 became the only FDA-approved treatment for a rare and potentially life-threatening blood disorder called paroxysmal nocturnal hemoglobinuria. For years, Soliris ranked as one of the world's most expensive medicines, with a list price in the hundreds of thousands of dollars.
Since then, Soliris has been approved to treat three more rare conditions. Alexion has also added four more drugs to its portfolio — one of which, Ultomiris, is meant to offset encroaching challenges to Soliris from generic competition. During the first nine months of this year, Alexion recorded almost $4.5 billion in net sales, an increase of 24% from the same period in 2019.
In spite of that growth, Alexion has run into challenges, first with a sales scandal that led to the ouster of several executives, and then with its investor base. In particular, activist investor Elliott Advisors has taken issue with the strategy outlined by Alexion management and called for a sale of the company. Elliott pushed for a sale again this year, following the announcement of the Portola acquisition.
Though Alexion's share price rose around 10% this year, it remains well below the $200-per-share crest hit in mid-2015.
"Alexion’s stock has floundered for several years, and despite excellent operational execution, energetic business development activity and improving capital allocation, the share price had failed to respond durably, and investors (not only Elliott) had run out of patience," wrote Geoffrey Porges, an analyst at SVB Leerink, in a note to clients Saturday.
Porges argues, however, that while Alexion's drugs are "far more valuable in the hands of a large diversified company" with an established global footprint, investors may still take issue with the buyout because of price.
"This is such a scarce and high-quality asset that in this instance, the final transaction price may need to reach $200 to satisfy Alexion’s shareholders" the analyst wrote. "We believe that in the coming days and weeks the debate about this transaction will center on whether this is enough, and whether other bidders might emerge, rather than whether this was too much."
Alexion would pay AstraZeneca a fee of up to $1.2 billion if it completes a deal with another buyer.
For AstraZeneca, the acquisition is a major shift, catapulting the British pharma giant to the upper ranks of rare disease drugmaking. AstraZeneca has long been a leader in treatments for respiratory disease, but sales have stagnated. Newer drugs for cancer and diabetes have kept the business growing, but competition remains very stiff in both those areas.
If approved by shareholders, the Alexion deal would be yet another twist on the winding journey AstraZeneca has taken over the last handful of years.
Back in 2014, Pfizer tried to acquire the company in what would have been the biggest pharmaceutical deal in history. After that deal fell apart, AstraZeneca then doubled down in oncology, securing important approvals for the drugs Lynparza, Tagrisso and Imfinzi over the next few years.
By early 2019, AstraZeneca had inked an ambitious licensing deal with Daiichi Sankyo, a Japan-based drug company, worth nearly $7 billion.
And more recently, Bloomberg reported that AstraZeneca had approached Gilead, the Californian biotech known for its work in antivirals, including the COVID-19 therapy Veklury, about a potential merger.
In a statement Saturday, AstraZeneca's CEO Pascal Soriot noted that Alexion is not only established in rare diseases, but should also boost his company's presence in immunology. Soliris and Ultomiris, for example, treat various rare diseases by regulating part of the immune system.