Alexion replaces CFO Clancy and his 'legendary caution.' Could an M&A spree follow?

Alexion
Alexion CFO Paul Clancy is out, and his "legendary caution" toward transactions could be out with him. (Alexion)

When Paul Clancy jumped ship from Biogen to become Alexion’s chief financial officer in 2017, he was touted as a “careful steward” by top brass. That steady hand was crucial for a drugmaker looking to outrun its troubled past and flailing share price.

Paul Clancy

Now, the careful steward is gone—and an M&A spree could be on the horizon, one analyst posits.

Clancy will step away from his post after third-quarter financial results are released in favor of Aradhana Sarin, M.D., Alexion’s chief strategy and business officer responsible for the drugmaker’s $2 billion in recent pipeline acquisitions. Clancy will remain on as a senior adviser through mid-2020, the company said in a Tuesday release.

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Clancy’s tenure at Alexion was marked by relative stability in the drugmaker’s finances, backed by what SVB Leerink analyst Geoffrey Porges called a “cautious … and disciplined” hand.

In total, Alexion’s share price slightly fell from a high of $113.98 on June 16, 2017—two days after Clancy’s hiring was announced—to $107.83 in pre-market trading Wednesday.

What that slight decrease undersells, Porges said, was Clancy’s role in steering Alexion back to respectability after a sales fraud investigation swept out most of the drugmaker’s leadership.

“He has contributed materially to the rehabilitation of Alexion’s reputation, and in no small measure ensured that the company’s stock became investable again after the difficulties of 2016,” Porges said in a Wednesday note to investors.

RELATED: Alexion snags longtime Biogen vet and 'careful steward' Clancy to fill its CFO post

In November of that year, Alexion opened an internal investigation into claims its sales team used fraudulent methods to boost sales of ultra-rare disease drug Soliris, then the most expensive med on the market.

In January of the following year, the investigation found that senior management had pressured sales members to place orders of Soliris earlier than normal in a process known as “pull-in sales,” which peaked between $10 million and $17 million in the fourth quarter of 2015.  

By that point, Alexion’s board had already cleared house with the December replacements of interim CEO David Hallal and CFO Vikas Sinha. Despite one source telling CNBC the execs had “lost confidence” with the board, the drugmaker never gave a specific reason for the board’s heel turn.

RELATED: Alexion's beating forecasts with Soliris-to-Ultomiris switch. So what's up with its pesky stock price?

After an interim period with former AstraZeneca head David Brennan at the helm, Alexion hired on CEO Ludwig Hantson to take over the listing ship in March 2017. Clancy came on board three months later after the drugmaker’s stand-in CFO, R&D chief, commercial chief and head of human resources all packed their bags.

Aradhana Sarin
Aradhana Sarin

In his more than two years on the job, Porges said, Clancy acted the “consummate professional”—making his departure after just two years “something of a surprise.”

In Sarin, who joined Alexion in 2017 as senior vice president and head of business development and corporate strategy, Alexion is getting an “unknown quantity” due to her lack of C-suite experience, according to Porges. That transition could spell trouble for Alexion’s investors.

“Without (Clancy’s) steadying hand, investors are likely to be concerned about more uncertainty in quarterly performance, more volatility in profitability and operating results and bigger surprises in business development announcements,” Porges wrote. “At this stage, despite Dr. Sarin’s strong reputation, in our view there’s no basis for arguing this transition will be positive for the stock or for investors' interests.”

RELATED: Amgen-Alexion deal rumors resurface, to the delight of investors and analysts

One area where Sarin could weigh in is M&A. Porges said Clancy was known for his “legendary caution” toward transactions, and his replacement could open new doors for the drugmaker if the board favors a possible buyout.

In August, Alexion was rumored as a potential acquisition target for Amgen—a prospect that cheered investors and analysts and sent the company's share price up 7%. However, Amgen not only nixed those hopes with a $13.4 billion deal for Celgene's Otezla, but then almost immediately filed a patent challenge to Soliris, Alexions’ $3 billion-a-year bestseller.

Sarin could also help size up more acquisitions for Alexion after negotiating $2 billion worth of deals in her time with the company. However, Porges said those pipeline-boosting deals—the largest being the 2018 buyout of Syntimmune for $1.2 billion—weren’t all winners.

Among the three transactions Sarin secured, none has so far resulted in a new drug on the market.

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