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Anglo-Swedish pharmaceutical company AstraZeneca has agreed to buy American biotech group Alexion in a $ 39 billion deal, marking the largest deal reached by a pharmaceutical company since the start of the Covid-19 pandemic.
The cash and stock acquisition will deepen AstraZeneca’s core focus on immunology, bringing a portfolio of experimental drugs that target rare diseases as it rushes to develop a coronavirus vaccine.
For Alexion, the sale follows pressure from activist hedge fund Elliott Management, which in May demanded that the company be sold, citing management errors.
The transaction announced on Saturday comes after months of speculation that AstraZeneca CEO Pascal Soriot was pursuing a big target, looking to take advantage of a rising share price that has seen the UK drugmaker become one of the largest companies listed on the FTSE 100.
The transaction values Alexion at $ 175 per share, a 45 percent premium over its closing price on Friday. Alexion shareholders will own about 15 percent of the combined company.
Under the terms of the transaction, Alexion shareholders will receive $ 60 cash and 2.12 shares of the US-listed AstraZeneca entity for each share they own.
The acquisition is the largest transaction in pharmaceuticals since 2019, when AbbVie acquired Allergan for $ 63 billion, and the largest deal to target a US company in any sector this year.
Alexion targets diseases caused by uncontrolled activation of a part of the immune system known as the complement system that stimulates the ability of antibodies to kill microbes and promotes inflammation. Alexion has a portfolio of 11 molecules that AstraZeneca will help build.
The UK-based company believes this approach can also be applied to more common illnesses.
Soriot said Alexion will strengthen AstraZeneca’s position in the United States, where it has been rebuilding its presence in recent years, especially in oncology. The benefits flowed both ways, he said. Alexion had a limited presence in emerging markets “and almost zero presence in China”, both areas where AstraZeneca is strong, allowing for more effective globalization of Alexion’s portfolio.
Soriot said the talks started “a few months ago” and AstraZeneca was not aware of rival bidders. “As far as we know, there was no competitive process,” he said.
Analysts at SVB Leerink said: “While we have long suggested that $ 175 was the correct range for an acquisition, in today’s inflated market we believe investors could demand more from AstraZeneca or another acquirer.”
They added: “This is such a rare and high-quality asset that in this case the final price of the transaction may need to reach $ 200 to satisfy Alexion shareholders, or be based more on cash, rather than predominantly stocks. “.
AstraZeneca is targeting $ 500 million in pre-tax synergies from the deal, which Soriot says would come in part from downsizing in general administrative functions. Alexion has about 3,000 employees, while AstraZeneca has about 70,000.
The companies said they expected the acquisition to close in the third quarter of next year.
“When you come to the conclusion that the combination is going to be good and it is going to work well, it is done when the opportunity arises,” Soriot said when asked about the interaction of the coronavirus pandemic and the agreement.
AstraZeneca became a partner at Oxford University for the development of a coronavirus vaccine earlier this year. It has pledged to sell it at cost during the pandemic and at no profit to developing nations in perpetuity. It does not have a native vaccine business, but instead focuses on R&D in areas such as oncology.
Peer-reviewed data released this month showed an average combined efficacy of 70 percent, less than for competitor-made vaccines. Observers have questioned the data, although any vaccine with an efficacy greater than 50 percent has yet to be approved by European and US regulators.
Soriot said he hoped AstraZeneca could apply for regulatory approval for the vaccine in the US within six weeks and that approval for some jurisdictions was expected before the end of the year.
Evercore and Centerview Partners were AstraZeneca’s main financial advisers, while Ondra provided capital markets advice. Morgan Stanley, JPMorgan and Goldman Sachs will help AstraZeneca finance the deal. Freshfields was AstraZeneca’s legal advisor. Bank of America advised Alexion and Wachtell provided legal advice.
