Anglo-Swedish drugmaker AstraZeneca has agreed to buy US biotechnology group Alexion in a $39bn deal, marking the biggest agreement struck by a pharmaceutical company since the start of the Covid-19 pandemic.
The cash-and-stock takeover will deepen AstraZeneca’s core focus on immunology, by bringing a pipeline of experimental drugs that target rare diseases as it races to develop a coronavirus vaccine.
For Alexion, the sale follows pressure from activist hedge fund Elliott Management, which in May demanded the company sell itself, citing management missteps.
The transaction announced on Saturday comes after months of speculation that AstraZeneca chief executive Pascal Soriot was hunting for a large target, seeking to take advantage of a soaring share price that has seen the UK drugmaker become one of the largest listed businesses on the FTSE 100.
The transaction values Alexion at $175 per share, a 45 per cent premium to its closing price on Friday. Alexion shareholders will own about 15 per cent of the combined company.
Under the terms of the transaction, Alexion shareholders will receive $60 in cash and 2.12 shares from AstraZeneca’s US-listed entity for each share they hold.
The acquisition is the biggest transaction in pharmaceuticals since 2019, when AbbVie acquired Allergan for $63bn, and the largest deal to target a US company in any sector this year.
Alexion focuses on diseases that are caused by an uncontrolled activation of a part of the immune system known as the complement system that spurs antibodies’ abilities to clear microbes and promotes inflammation. Alexion has a pipeline of 11 molecules that AstraZeneca will help to build on.
The UK-based company believes this approach can also be applied to more common diseases.
Mr Soriot said Alexion would strengthen AstraZeneca’s position in the US where it has been rebuilding its presence in recent years, notably in oncology. The benefits flowed both ways, he indicated. Alexion had only a limited foothold in emerging markets “and almost zero presence in China”, both areas in which AstraZeneca is strong, allowing for more effective globalisation of Alexion’s portfolio.
Mr Soriot said talks began “a few months ago” and that AstraZeneca was not aware of rival bidders. “To our knowledge there was not a competitive process,” he said.
Analysts at SVB Leerink said: “While we have long suggested that $175 was the right 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 scarce and high-quality asset that in this instance, the final transaction price may need to reach $200 to satisfy Alexion’s shareholders, or to be based more in cash, rather than predominantly stock.”
AstraZeneca is targeting $500m in pre-tax synergies from the deal, which Mr Soriot said would partly come from headcount reduction 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 conclude that the combination is going to be good and is going to work well you do it when the opportunity arises,” Mr Soriot said when asked about the interplay of the coronavirus pandemic and the deal.
AstraZeneca became Oxford university’s partner for the development of a vaccine for coronavirus earlier this year. It has pledged to sell it at cost during the pandemic, and at no profit to developing nations in perpetuity. It has no native vaccine business, focusing instead on R&D in such areas as oncology.
Peer reviewed data released this month showed a pooled average efficacy of 70 per cent, less than for vaccines made by competitors. Observers have questioned the data, though any one vaccine with efficacy greater than 50 per cent is still set to be approved by European and US regulators.
Mr Soriot said he expected AstraZeneca to be able to file 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 lead financial advisers to AstraZeneca, while Ondra provided capital markets advice. Morgan Stanley, JPMorgan and Goldman Sachs will help AstraZeneca finance the deal. Freshfields was AstraZeneca’s legal adviser. Bank of America advised Alexion and Wachtell provided legal advice.