Alexion Holders May (In Time) Love Lofty Biotech Bid: Real M&A
2015-05-06 20:22:19.71 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Brooke Sutherland
(Bloomberg) -- Alexion Pharmaceuticals Inc.’s decision to
make a pricey bet on a rare-disease drugmaker may eventually pay
off for investors, even if they’re not giving it much love now.
The $31 billion maker of a treatment for rare-blood
disorders agreed to buy Synageva BioPharma Corp. for about $230
a share, or a more than 120 percent premium. Alexion’s shares
plunged as much as 11 percent as “some investors may be picking
their jaws off the floor at such a valuation,” said Christopher
Raymond, a Chicago-based analyst at Robert W. Baird & Co.
The hefty $8.4 billion price tag stands out even in a
biotechnology industry that’s drawn sky-high takeover premiums.
Only two transactions rank as more expensive: Bristol-Myers
Squibb Co.’s 2012 purchase of Inhibitex at a 126 percent
premium, and Merck & Co.’s takeover last year of Idenix
Pharmaceuticals Inc. at almost quadruple Idenix’s average
trading price in the 20 days leading up to the announcement.
“It is definitely on the upper end on the deals that we’ve
seen,” Asthika Goonewardene, an analyst at Bloomberg
Intelligence, said in a phone interview. “There are a lot of
raised eyebrows. It’s quite a lot.”
It may be worth it.
Synageva’s top drug Kanuma, for the organ-damaging
condition LAL deficiency, is on track to get approved later this
year and may ultimately generate as much as $1.5 billion in
revenue, according to analysts. Kanuma will help Alexion
diversify beyond Soliris, the company’s sole marketed product
right now. It also should complement the metabolic bone-disease
treatment Strensiq that Alexion is aiming to launch this year.
Drug Pipeline
Synageva also has more drugs in pre-clinical development --
some of which haven’t even been disclosed yet -- and a unique
protein expression platform that could eventually be used to
create even more therapies, said Raymond of Baird. The
opportunity there may eventually make the deal terms seem cheap,
said Joshua Schimmer of Piper Jaffray Cos.
This “clearly is right in Alexion’s global wheelhouse,”
Schimmer, a New York-based analyst, wrote in a report on
Wednesday. “It’s safe to assume that they did due diligence on
the market opportunity far more comprehensively than any analyst
could. The company’s core competency is in this space, and they
aren’t ones to overspend. We’re comfortable giving them the
benefit of the doubt.”
David Hallal, chief executive officer of Alexion, said
Synageva was an ideal strategic fit.
“The value of Synageva in our hands really justifies” the
premium, Hallal said Wedmesday in an interview. “I look at all
those catalysts to come, and think that if I waited it would be
a higher price.”
Deal Risk
Late-stage drugs like Synageva’s Kanuma can still fail.
Bristol-Myers ended up having to take a $1.8 billion charge and
discontinue development of Inhibitex’s hepatitis C pill for
safety reasons. That’s a risk that can come with paying a high
premium for a drug still in development.
Merck’s deal for Idenix, another developer of hepatitis
treatments, closed in August.
A knockout bid for Synageva may have been necessary for
Alexion to fend off other bidders. AbbVie Inc. ended up paying
$21 billion for Pharmacyclics Inc. after a heated competition
with Johnson & Johnson. That was about a 55 percent premium to
Pharmacyclics’ average unaffected share price before Bloomberg
News reported it was exploring a sale.
Rare-disease medicine “is a high-margin area and a lot of
companies are looking to get in there,” Goonewardene of
Bloomberg Intelligence said. “This premium might have been what
the company may have required to get out of bed and do a deal
with Alexion.”
For Related News and Information:
AbbVie’s Bid Ups Ante as Buyers Bet on Cancer Drugs: Real M&A
Salix Gets Swept Into Pharma Frenzy as Premiums Soar: Real M&A
Clovis Deal Chatter Heats Up Again as Goldman Says Buy: Real M&A
Bloomberg Intelligence, specialty pharma: BI SPEC <GO>
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>
--With assistance from Caroline Chen in San Francisco.
To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman
2015-05-06 20:22:19.71 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Brooke Sutherland
(Bloomberg) -- Alexion Pharmaceuticals Inc.’s decision to
make a pricey bet on a rare-disease drugmaker may eventually pay
off for investors, even if they’re not giving it much love now.
The $31 billion maker of a treatment for rare-blood
disorders agreed to buy Synageva BioPharma Corp. for about $230
a share, or a more than 120 percent premium. Alexion’s shares
plunged as much as 11 percent as “some investors may be picking
their jaws off the floor at such a valuation,” said Christopher
Raymond, a Chicago-based analyst at Robert W. Baird & Co.
The hefty $8.4 billion price tag stands out even in a
biotechnology industry that’s drawn sky-high takeover premiums.
Only two transactions rank as more expensive: Bristol-Myers
Squibb Co.’s 2012 purchase of Inhibitex at a 126 percent
premium, and Merck & Co.’s takeover last year of Idenix
Pharmaceuticals Inc. at almost quadruple Idenix’s average
trading price in the 20 days leading up to the announcement.
“It is definitely on the upper end on the deals that we’ve
seen,” Asthika Goonewardene, an analyst at Bloomberg
Intelligence, said in a phone interview. “There are a lot of
raised eyebrows. It’s quite a lot.”
It may be worth it.
Synageva’s top drug Kanuma, for the organ-damaging
condition LAL deficiency, is on track to get approved later this
year and may ultimately generate as much as $1.5 billion in
revenue, according to analysts. Kanuma will help Alexion
diversify beyond Soliris, the company’s sole marketed product
right now. It also should complement the metabolic bone-disease
treatment Strensiq that Alexion is aiming to launch this year.
Drug Pipeline
Synageva also has more drugs in pre-clinical development --
some of which haven’t even been disclosed yet -- and a unique
protein expression platform that could eventually be used to
create even more therapies, said Raymond of Baird. The
opportunity there may eventually make the deal terms seem cheap,
said Joshua Schimmer of Piper Jaffray Cos.
This “clearly is right in Alexion’s global wheelhouse,”
Schimmer, a New York-based analyst, wrote in a report on
Wednesday. “It’s safe to assume that they did due diligence on
the market opportunity far more comprehensively than any analyst
could. The company’s core competency is in this space, and they
aren’t ones to overspend. We’re comfortable giving them the
benefit of the doubt.”
David Hallal, chief executive officer of Alexion, said
Synageva was an ideal strategic fit.
“The value of Synageva in our hands really justifies” the
premium, Hallal said Wedmesday in an interview. “I look at all
those catalysts to come, and think that if I waited it would be
a higher price.”
Deal Risk
Late-stage drugs like Synageva’s Kanuma can still fail.
Bristol-Myers ended up having to take a $1.8 billion charge and
discontinue development of Inhibitex’s hepatitis C pill for
safety reasons. That’s a risk that can come with paying a high
premium for a drug still in development.
Merck’s deal for Idenix, another developer of hepatitis
treatments, closed in August.
A knockout bid for Synageva may have been necessary for
Alexion to fend off other bidders. AbbVie Inc. ended up paying
$21 billion for Pharmacyclics Inc. after a heated competition
with Johnson & Johnson. That was about a 55 percent premium to
Pharmacyclics’ average unaffected share price before Bloomberg
News reported it was exploring a sale.
Rare-disease medicine “is a high-margin area and a lot of
companies are looking to get in there,” Goonewardene of
Bloomberg Intelligence said. “This premium might have been what
the company may have required to get out of bed and do a deal
with Alexion.”
For Related News and Information:
AbbVie’s Bid Ups Ante as Buyers Bet on Cancer Drugs: Real M&A
Salix Gets Swept Into Pharma Frenzy as Premiums Soar: Real M&A
Clovis Deal Chatter Heats Up Again as Goldman Says Buy: Real M&A
Bloomberg Intelligence, specialty pharma: BI SPEC <GO>
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>
--With assistance from Caroline Chen in San Francisco.
To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman