has agreed to acquire
setting the British drugmaker up to expand its footprint in rare diseases and immunology during a year in which the company has become a household name for developing a Covid-19 vaccine candidate with the University of Oxford.
As the market reacted to the news on Monday, share movements for the two companies diverged drastically, with AstraZeneca sinking in London trading while Alexion surged in the New York premarket.
The back story. AstraZeneca and Alexion said on Saturday that the two companies had agreed on a cash and stock deal valuing Alexion at $39 billion. Subject to the approval of shareholders from both companies and regulatory clearances, the transaction is expected to close in the third quarter of 2021.
Alexion’s bestselling drug is Soliris, one of the most expensive drugs in the world, used to treat paroxysmal nocturnal hemoglobinuria (PNH)—a rare, life-threatening blood disease.
A big bet on rare-disease and immunology drugs would allow AstraZeneca to diversify its fast-growing cancer drugs business. The company said it expected to see pretax synergies of around $500 million a year from the transaction as well as an immediate boost to earnings, while incurring a one-time cash cost of $650 million to realize the synergies.
What’s new. As markets opened after the weekend’s news of the takeover, AstraZeneca stock dived as much as 9% in London trading, settling around 7%, while shares in Alexion surged more than 30% in the New York premarket.
Analysts have scrutinized the purchase price for Alexion—$175 per share—which is a heavy premium to the stock’s $121 closing price on Friday.
“The Alexion deal is pricey seeing as it represents a 45% premium. It is understood that the London-listed company will take out a £13 billion bridging loan finance to the transaction,” said David Madden, market analyst at CMC Markets UK.
“The takeover will give the pharma giant more exposure to rare-disease and immunology drugs,” Madden said, noting that AstraZeneca has had recent success with its cancer drugs.
Looking ahead. The largest deal in AstraZeneca’s history has the market concerned that the company is paying too much for Alexion, even as analysts have praised the assets and drugs it will pull into its pipeline.
Another concern is that Alexion could try and pull even more money out of the British drugmaker. This may be unrealistic. Alexion has been under pressure to sell since May, when a letter to the board from activist investor Elliott Associates demanded the company to sell itself, citing management missteps. AstraZeneca’s offer is apparently the only serious one Alexion has received, and could just be the right tonic.