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Alexion to Buy Achillion for $930M, Strengthen PNH Franchise

Zacks Equity Research

Alexion Pharmaceuticals, Inc. ALXN is the latest company to join the ongoing M&A wave in the pharma/biotech sector.

The company announced that it has entered a definitive agreement to acquire a clinical-stage biopharmaceutical company, Achillion Pharmaceuticals, Inc. ACHN, for $930 million. 

Aspects of the Deal

Achillion primarily focuses on the development of oral small molecule Factor D inhibitors to treat people with complement alternative pathway-mediated rare diseases, such as paroxysmal nocturnal hemoglobinuria (PNH) and C3 glomerulopathy (C3G). The acquisition will add two clinical-stage candidates to Alexion’s pipeline — lead candidate, danicopan (ACH-4471), in phase II and ACH-5228 in phase I.

The FDA has granted Breakthrough Therapy designation to danicopan in combination with a C5 monoclonal antibody in PNH patients who are sub-optimal responders to a C5 inhibitor alone.    

Achillion is conducting a phase II clinical trial of danicopan in combination with Alexion’s blockbuster drug, Soliris, in patients with PNH, who are suboptimal responders to only Soliris.

Dosing with Alexion’s new PNH drug, Ultomiris, in combination with danicopan has also been initiated in the extension study.

Financial Terms of the Transaction

Achillion’s shareholders will get $6.30 per share as an initial consideration. Alexion will also be acquiring Achillion’s cash balance. The transaction includes the potential for additional consideration in the form of non-tradeable contingent value rights, which will be paid to Achillion’s shareholders if certain clinical and regulatory milestones are achieved within specified periods. These include $1.00 per share for the potential FDA approval of danicopan and $1.00 per share for the initiation of the phase III study, ACH-5228.

The transaction is expected to close in the first half of 2020.

Our Take

Alexion is looking to strengthen its PNH franchise with this acquisition. Its blockbuster drug, Soliris, is already approved for the treatment of PNH. Additionally, to combat generic competition for Soliris, once it loses patent protection, the company developed a long-acting C5 complement inhibitor, Ultomiris, for the treatment of adults with PNH. This consolidated its PNH franchise. The initial uptake of the drug has been strong.

Shares of Achillion rallied on the news. Shares of Alexion have gained 2.7% in the year so far against the industry’s decline of 5.1%. 

 

A potential approval of danicopan will make Alexion a market leader in the PNH space.  The development of other drugs will also reduce its dependence on Soliris. Notably, Amgen AMGN is developing a biosimilar of Soliris.

The deal comes at a time when its strong rare diseases portfolio has put the company in the spotlight for a potential takeover, as the wave of consolidation gathers steam in the biotech sector after the mega-merger announcement of Bristol-Myers and Celgene CELG at the beginning of the year.

Alexion currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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