AstraZeneca acquires Big Biotech Alexion with a 45% premium
During the weekend, on December 12, two of Arctic Aurora LifeScience’s portfolio companies made headlines as AstraZeneca announced that it had agreed to acquire Alexion Pharmaceuticals in the largest biotech acquisition to date in 2020, in a deal worth USD 39 billion. While M&A activity in the biopharma world has been slightly muted in 2020 due to the COVID-19 pandemic, pharma and large biotech appetite for new treatments and technologies has still become apparent during the second half of the year. Although Alexion is considered a more mature company than most that have been acquired this year, it does fill a key gap in AstraZeneca’s product repertoire, namely drug treatments for rare diseases. The agreement values Alexion shares at USD 175, of which AstraZeneca will pay USD 60 in cash and the remainder in shares. That price tag implies a 45% market premium to the previous closing price.
Alexion has earned its acquisition price mainly through the drug Soliris, one of the first blockbuster drugs that targets rare disease populations. Soliris works by dampening the immune system in autoimmune diseases, where immune reactions occur towards the body’s own tissue. Through this approach, Soliris has received approvals for use in four different autoimmune disorders and the drug account for approximately 70% of the company’s projected USD 6 billion in sales revenues for 2020.
Looking forward, as Soliris patents will expire in the next few years, Alexion has launched a next-generation version called Ultomiris that offers a more convenient dosing schedule. In addition, the company has built a pipeline of drug candidate for various rare diseases. Alexion are currently conducting clinical trials for nine such new drugs.
AstraZeneca has a product portfolio that covers many therapeutic areas, of which oncology is the main contributor to the company’s current strong revenue growth. In addition, cardiovascular disease, renal disorders, respiratory disease, and diabetes has been part of AstraZeneca commercial foundation. However, the company has never ventured into rare diseases with conviction. Now, Alexion’s Boston headquarters will be the main hub for rare disease development for AstraZeneca.
The announced deal is large enough for noticeable uptick in AstraZeneca’s bottom line on day one of the merged company structure. In addition, AstraZeneca expects to strengthen margins with USD 500 million synergies within three years and AstraZeneca’s reach into China may boost the Alexion franchise further as Soliris sales are currently concentrated to the US, and to some extent to Europe. At the same time, the deal in small enough not to disrupt AstraZeneca’s capital structure and dividend plans. The deal, which is expected to close in Q3 2021, is subject to shareholder and regulatory approvals.