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Shares in AstraZeneca fell sharply after it agreed to a $ 39 billion (£ 29 billion) acquisition of American rare disease specialist Alexion, the biggest deal in its history if it goes ahead..
Investors sold shares in the Anglo-Swedish pharmaceutical company out of fear that it was paying too much for Alexion in the shares-and-shares deal. The offer price of $ 175 per share represents a 45% premium over Alexion’s closing price before the deal was announced. To finance the deal, AstraZeneca has obtained a $ 17.5 billion bridge loan.
Shares in AstraZeneca, Britain’s largest pharmaceuticals, fell 8% on Monday to £ 75.41, making it the biggest drop on the FTSE 100. They are below the £ 76.07 level in the one that started the year. The stock soared to £ 96.39 in July when interim results showed that its coronavirus vaccine elicited an immune response in a study of 1,000 people.
However, this month stocks have been hit by the results of its recent vaccine trials and doubts about whether it will be licensed in the US, following criticism of how it conducted its clinical trials.
AstraZeneca focuses on the development of drugs for cancer, as well as for cardiovascular, kidney and metabolic and respiratory diseases. Alexion has a portfolio of 11 experimental drugs for rare diseases such as hypophosphatasia, a life-threatening metabolic disease.
Alexion had been pressured by US activist hedge fund Elliott Management to go up for sale in May, but had not attracted any bidders so far.
Six years ago, AstraZeneca defended itself against a hostile offer from US rival Pfizer. This year, AstraZeneca CEO Pascal Soriot went looking for a big deal and reportedly approached US rival Gilead Sciences in May about a possible merger. As its share price soared, AstraZeneca overtook Royal Dutch Shell to become the UK’s largest company by market value at the end of April, but has lagged behind Shell and Unilever.
The other major British pharmaceutical company, GlaxoSmithKline, has been tied to a $ 4.6 billion bid for San Francisco-based Eidos Therapeutics. Eidos is 60% owned by BridgeBio Pharma, which wants to buy the rest, but BridgeBio said this month that a “large international pharmaceutical company” had offered $ 120 a share for Eidos at the end of November. GSK declined to comment.
GSK has suffered a major setback in its efforts to develop a Covid-19 vaccine with its French partner Sanofi. On Friday, the companies said the jab, scheduled for June, would be delayed until the end of next year after trials revealed it had failed to elicit a strong immune response in older people.
