AstraZeneca (AZN) Stock Down on $39B Offer to Buy Alexion
In the drug/biotech sector’s biggest M&A deal this year, AstraZeneca plc AZN announced a definitive agreement to acquire rare disease drugmaker and S&P component, Alexion ALXN for a whopping sum of $39 billion.
The proposed cash-and-stock acquisition will add Alexion’s blockbuster drug Soliris, which is approved for ultra-rare disorders, paroxysmal nocturnal hemoglobinuria (PNH), atypical hemolytic uremic syndrome (aHUS), generalized myasthenia gravis (gMG) and neuromyelitis optica spectrum disorder. Alexion’s second-generation C5 complement inhibitor with a more convenient dosing regimen, Ultomiris, was launched recently for PNH and aHUS. Ultomiris has strengthened Alexion’s PNH franchise and reduced its dependence on Soliris for growth. The conversion rates of Soliris patients to Ultomiris has been encouraging. Several label expansion studies are ongoing on Ultomiris. Meanwhile, Alexion has a growing pipeline of candidates in rare diseases, a high-growth therapy area.
Per the deal, holders of each Alexion share will get $60 in cash and 2.1243 of AstraZeneca American depositary shares. The offer price of $175 per share represents a premium of almost 45% to Alexion Friday’s closing price of $120.98 per share. Alexion shareholders will own approximately 15% of the combined company, once the acquisition closes. The acquisition has been approved by the boards of both the companies.
AstraZeneca’s shares declined more than 5% in pre-market trading on Monday, indicating that investors were not happy with the acquisition announcement due to concerns about future competition for the Soliris/Ultomiris franchise. This year so far, AstraZeneca’s shares have risen 8.9% compared with an increase of 4.2% for the industry.
Importantly, the acquisition diversifies AstraZeneca’s portfolio from oncology and cardiovascular areas to rare disease, an attractive area for large pharmaceutical companies for buyouts to stimulate sales growth. Alexion’s sales rose 21% in 2019 to $5 billion and $4.5 billion in the first nine months of 2020. The combined company is expected to generate double-digit revenue growth through 2025. The acquisition will boost AstraZeneca’s operating margin and cash flow position and is expected to generate annual synergies of about $500 million. The deal is expected to close in the third quarter of 2021. AstraZeneca plans to make Boston its headquarters for rare diseases.
This is AstraZeneca’s largest acquisition deal to date. In 2007, AstraZeneca acquired biotechnology company MedImmune for $15.6 billion. Other smaller acquisition deals were Acerta Pharma for $5.07 billion and ZS Pharma for $2.7 billion.
AstraZeneca also regularly bolsters its product/pipeline portfolio by acquiring complementary businesses.
Among some recent asset acquisitions, in 2019, AstraZeneca acquired joint development and commercialization rights to an innovative antibody drug conjugate (ADC), Enhertu (trastuzumab deruxtecan) from Japan’s Daiichi Sankyo. AstraZeneca also has a profit- sharing deal with Merck MRK for Lynparza and Koselugo (selumetinib).
AstraZeneca currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earlier this year, AbbVie ABBV closed its $63 billion purchase of Allergan. The deal was announced in June last year.
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