AstraZeneca Shares Fall After Acquiring Alexion in a $39 Billion Deal

By Adriaan Brits Monday, December 14, 2020

Shares of the British-Swedish pharmaceutical titan AstraZeneca are trading 7% lower in London today as investors price in the acquisition of Alexion Pharmaceuticals for $39 billion. A deal, which is the largest in AstraZeneca’s history, will shift the company’s focus from cancer to immunology and rare-disease drugs.

Hefty Price Paid

In the largest move that company ever made, AstraZeneca moved to acquire Alexion at the same time when the British-Swedish drugmaker said it’s conducting tests to see whether its coronavirus vaccine is 90% effective.

Under the terms of the deal, Alexion shareholders will receive $60 in cash and around $115 worth of equity per share, suggesting a total price of $175 per share. The deal was approved by both sides and is expected to be completed in Q3 2021.

Shares of Alexion skyrocketed over 30% in pre-open Monday, while AstraZeneca’s share price is trading about 7% in the red.

“It is a tremendous opportunity for us to accelerate our development in immunology, getting into a new segment of disease, a new segment of physicians, and patients we haven’t been able to cover so far,” said Pascal Soriot, CEO of AstraZeneca.

“Alexion has established itself as a leader in complement biology, bringing life-changing benefits to patients with rare diseases. This acquisition allows us to enhance our presence in immunology.”

AstraZeneca believes the deal will instantly elevate its core earnings and help it obtain pre-tax synergy gains of about $500 million on an annual basis. The drugmaker also said it estimates about $650 million in one-time cash costs in the first three years after the deal closure.

Soriot said the deal with Alexion should end the rumors that he was stepping down from his duty as the CEO of the company. Furthermore, there were no other bidders for Alexion, Soriot added.

Marc Dunoyer, CFO of AstraZeneca, said he expects the equity capital boost once the deal is closed.

However, some of the investors have questioned AstraZeneca’s decision to buy Alexion.

Markus Manns, a senior portfolio manager at Union Investment, which holds a stake in AstraZeneca, said the acquisition raises questions over the drugmaker’s current portfolio.

“If you don’t have cash, don’t buy a large company unless it is a once-in-a-lifetime opportunity and has strong strategic merits,” Manns said.

“You can hardly call this deal a once-in-a-lifetime opportunity, and the strategic merits are weak.”

Higher Share in Rare-Disease Market Targeted

A medicine called Soliris, which is used to treat “paroxysmal nocturnal hemoglobinuria” and other immune-disorders, is believed to be the centerpiece of the deal. It is Alexion’s best seller, as the company’s revenue jumped by 3.6% to around $3 billion during the first nine months of the year.

Moreover, AstraZeneca has even more faith in a drug called Ultomiris, another rare-disease drug that the British-Swedish pharma giant will hope to bring to China and other developing markets.

Over the last three years, AstraZeneca’s stock advanced around 70%, making it easier for the company to make deals of this scale. On the other hand, Alexion’s stock has been going through a challenging period over recent years due to increased competition. This is one of the reasons why the company’s been on AstraZeneca’s radar for acquisitions.

Investment management company Elliott Management has urged the drugmaker to look for buyers. Elliot Management held private discussions with Alexion and said that the drugmaker’s chief executive Ludwig Handston’s autonomist strategy hasn’t really reaped any rewards and prevented it from their plan to make acquisitions in order to help its research operations.

When asked about the COVID-19 vaccine his company was working on, Soriot said it remained unclear whether AstraZeneca needs to wait for trial results before asking for approval from American regulators.

COVID-19 vaccines developed by Pfizer/BioNTech and Moderna have shown outstanding efficacy rates during the last phase of trials, leaving AstraZeneca out of the race. If the data from clinical trials returns positive, AstraZeneca is expected to submit the shot to the regulators in the course of six weeks.

Summary

AstraZeneca said it reached an agreement to buy the US drugmaker Alexion Pharmaceuticals for $39 billion, the biggest-ever deal for the British-Swedish pharmaceutical company. With the acquisition, AstraZeneca hopes to put more emphasis on developing rare-disease and immunology drugs.

About the Author


Headshot for author Adriaan Brits
As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.

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