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Hedge Fund Tells Alexion Management to Sell Company

Shares of Alexion Pharmaceuticals Inc. (NASDAQ:ALXN) were up fractionally on Tuesday after activist investment frim Elliot Advisors again called for a company sale. In a letter to chairman David Brennan, the hedge fund said Alexion should go out and look for a buyer because mismanagement has cratered shareholder value.

In the past five years, the price of the Boston-based biotech has slid more than 45% to about $104. It appears the last straw for Elliott was the company's acquisition of Portola Pharmaceuticals Inc. (NASDAQ:PTLA). When the deal was announced last week, Elliott noted that Alexion's market value was shaved by $1.7 billion, $300 million less than it paid for Portola, according to an article in Biopharmadive.


Since 2018, Alexion has bought three other companies in addition to Portola--Achillion Pharmaceuticals, Syntimmune and Wilson Therapeutics. The acquisitions were aimed at diversifying the company's business so it didn't have to rely so heavily on its rare disease drug Soliris, which accounted for 80% of company sales last year.

Elliot things Portola is a poor fit. "Portola has no chronic rare-disease exposure, the core of Alexion's focus and know-how, and instead targets a broad patient population in the acute hospital setting," the letter read. Elliott added that Alexion's foothold in rare disease treatments would likely to be attractive to members of Big Pharma.

Ellliot's skepticism about Portola seems to be warranted given that one of the keys to the deal is the company's drug Andexxa, an anticoagulant that a class of anticoagulant drugs that includes Bristol-Myers Squibb Co.'s (NYSE:BMY) and Pfizer Inc.'s (NYSE:PFE) Eliquis as well as Johnson & Johnson's (NYSE:JNJ) and Bayer's (BAYRY) Xarelto. Andexxa sales have disappointed, according to Paul Matteis, an analyst at the investment bank Stifel. The drug scored sales of about $112 million last year, but slumped 20% in the fourth quarter compared to the previous three-month period.

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Alexion's market capitalization is about $23 billion, so based on other deals in the pharmaceutical industry, the company could command a $40 billion price tag, according to Reuters. Alexion might be worth it given that it has one of the most profitable drug businesses.

During the quarter ended March 31, Alexion topped analyst estimates with earnings of $3.22 per share on about $1.4 billion in sales, up a respective 35% and 27% year over year. For all of 2020, the company lowered its guidance for both sales and earnings.

Alexion is trading below its low price estimate of $110 for the next 12 months according to TipRanks. Analysts are forecasting a median target of more than $141 and a high of $170.

Disclosure: The author holds positions in Bristol-Myers Squibb, Pfizer and Johnson & Johnson.

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This article first appeared on GuruFocus.