Deal value: $39 billion
Premium to previous closing price: 45%
Date announced: Dec. 12, 2020
How do you get sales to $40 billion from a base of $23.6 billion in just four years? It’s a great leap, one unattainable even with an annual growth rate of 10%, which would already be enviable for any Big Pharma company. CEO Pascal Soriot’s solution to that ambitious goal for AstraZeneca was a major acquisition.
By snapping up Alexion in a $39 billion deal, AstraZeneca will gain a rare disease portfolio that brought in sales of $5 billion in 2019 after a year-over-year increase of 21%. AZ’s own sales growth checked in at 12% in 2019 and 8% during the pandemic-hit first three quarters of 2020.
AZ expects Alexion’s drugs will grow by 9% per year through 2023, in line with Alexion’s own projection. But SVB Leerink analyst Geoffrey Porges sees “room for higher revenue from Alexion’s portfolio under AZ’s wing, especially for Ultomiris in neurology and for the complement portfolio in China, where Alexion is underpenetrated,” he said in a note about the deal.
In Alexion, AZ sees more than just an immediate top-line boost; the British drugmaker is interested in the Boston biotech’s immunology know-how, too.
Alexion’s portfolio is currently led by Soliris and Ultomiris, both of which target C5 as part of the complement system in the immune system. The company’s pipeline also includes agents targeting immune components such as Factor D and FcRn.
While Alexion has been pivoting these mechanisms against rare diseases, AZ figures the complement system can potentially be applied to more common diseases in the fields of oncology, neurology and respiratory. It hopes immunology could be the next oncology in terms of lucrative returns.
Despite Alexion management’s delivering on both top- and bottom-line performance, the company’s stock price has been under pressure over the past three years. Investors' dissatisfaction came in part from Alexion’s reliance on Soliris and Ultomiris, as well as some unconvincing takeovers, including its $1.4 billion purchase of Portola Pharmaceuticals for lagging anticoagulant reversal med Andexxa. And its drug candidates’ prospects didn’t seem to match the R&D expenses poured into them.
Calls for a sale have been circulating among Alexion investors for awhile, and analysts have long circled the company as a top target for acquisition—and come up with their lists of potential buyers. But they were looking from the perspective of a rare disease play, and AZ’s lack of experience in that space had made it a less obvious new owner for Alexion. In fact, AZ had spun off Viela Bio in 2018, severing six inflammation and autoimmune programs, including what later became Uplizna, a neuromyelitis optica spectrum disorder (NMOSD) rival to Soliris.
Still, rare disease represents an increasingly attractive field to Big Pharma thanks to its limited competition, lengthened market exclusivity and continuous product renewal, Porges said. So for what he had called a “rare M&A-ready large biopharma,” Porges suggested AZ should pay more than the $175 per share it's offering Alexion.
Jefferies’ Eun Yang, though, said the price is “healthy” for Alexion, especially as competition looms for its C5 franchise and a diversified pipeline has yet to materialize.