The FTSE 100-listed drug giant has offered to pay Alexion shareholders US$175 per share, made up of US$60 in cash and 2.1243 American depositary shares (ADSs), which each represent one-half of one ordinary AstraZeneca share. This is a 45% premium to Alexion’s close last week.
Alexion, which has failed to attract a suitor for some time, grew revenues by 21% to US$5bn in 2019 on the back of blockbuster drugs based on its anti-complement component 5 (C5) monoclonal antibody, while it also has a pipeline of 11 molecules across more than 20 clinical-development programmes.
AstraZeneca said the Boston-based company’s expertise in ‘complement biology’ for the treatment of rare diseases will accelerate its growing presence in immunology, highlighting that there are more than 7,000 known rare diseases but only around 5% have treatments approved by the US drug regulator.
The ‘complement cascade’ plays a crucial role in many inflammatory and autoimmune diseases across areas such as haematology, nephrology, neurology, metabolic disorders, cardiology, ophthalmology and acute care, while AstraZeneca said its own capabilities in genomics, precision medicine and oligonucleotides can be leveraged to develop medicines targeting less-frequent diseases.
“Combining AstraZeneca’s capabilities in precision medicine and Alexion’s expertise in rare-disease development and commercialisation will enable the new company to develop a portfolio of medicines addressing the large unmet needs of patients suffering from rare diseases,” the Anglo-Swedish group said in a statement.
The deal, which is being supported by a committed US$17.5bn bridge loan, is expected to close in the third quarter of 2021 and be immediately earnings-enhancing, to produce around US$500mln of savings in three years and to strengthen cash-flow generation.
Also on Monday, AstraZeneca said its combined drug to treat adults with moderate to severe chronic obstructive pulmonary disease, Trixeo Aerosphere, has been approved in the European Union.
Furthermore, there was also a conditional marketing authorisation given by the EU regulatory body’s Committee for Medicinal Products for Human Use (CHMP) about the company’s jointly developed drug with Daiichi Sankyo to treat patients with unresectable or metastatic HER2-positive breast cancer who have received two or more prior anti-HER2 based treatments.
The shares fell 5% to 7,720p in early trading on Monday.
There are several possible reasons for the market’s negative reaction, suggested Russ Mould, investment director at AJ Bell, including the extra debt being taken on and that as an immunology-focused business “will stick out like a sore thumb against the rest of AstraZeneca’s portfolio”.
“Alexon has failed to attract a suitor for some time, despite shareholder pressure, so investors might see AstraZeneca as a bit of a sap for pitching up with a 45% premium.”
For the analysts at UBS, it “looks mostly like a financial deal to us”, as AZ “needs access to cash and cash flow and Alexion delivers that without diluting the top-line trajectory too much”.
There is “no real overlap between the companies in our view”.
–Adds shares and broker comment–