© Reuters. AstraZeneca's COVISHIELD vaccine against coronavirus (COVID-19) vials are seen in a visual inspection device in a laboratory at the Serum Institute of India, Pune
From Ludwig Burger
FRANKFURT (Reuters) – Britain's AstraZeneca (NASDAQ 🙂 has agreed to buy drugs from US drug maker Alexion Pharmaceuticals (NASDAQ 🙂 for $ 39 billion.
The deal comes in a week that AstraZeneca was doing further research to confirm whether its COVID-19 vaccine could be 90% effective, potentially slowing adoption, and as a rival of Pfizer (NYSE 🙂 was launched in the UK and approved for use in the US.
The British company announced on Saturday that Alexion shareholders would receive $ 60 in cash and equity worth $ 115 per share – either in AstraZeneca's UK-traded common stock or in US dollar-denominated American Depositary Shares.
Based on an average ADR reference price of $ 54.14, this translates into a total price of $ 175 per share. Alexion shares closed at around $ 121 apiece on Friday.
"It is a tremendous opportunity for us to accelerate our development in immunology and enter a new segment of diseases, a new segment of doctors and patients that we have not been able to cover before," said Pascal Soriot, Chief Executive of AstraZeneca, towards a media call.
Alexion's best-selling drug is Soliris, which is used to treat a number of rare immune diseases, including paroxysmal nocturnal hemoglobinuria (PNH), which causes anemia and blood clots. Revenue increased 3.6% to $ 3 billion for the first nine months.
AstraZeneca hopes that an improved version of Soliris called Ultomiris has even greater market potential. More growth is expected from the target's rare disease treatments launch in China and other emerging markets.
The British firm said the boards of both companies had approved the deal, which is expected to close in the third quarter of 2021.
AstraZeneca was once considered a leader in developing a COVID-19 vaccine, but has fallen behind Pfizer and its partner BioNTech Moderna (NASDAQ 🙂 whose recordings have shown greater effectiveness in late clinical trials.
With a planned capital increase of approximately $ 25 billion after the deal is closed, Soriot plans to capitalize on a strong advance in AstraZeneca shares that can be attributed to the outstanding growth of new cancer drugs.
Shares are up around 70% over the past three years. A precursor cash call on a much smaller scale was a $ 3.5 billion issue last year to fund the purchase of rights to Daiichi Sankyo's cancer drug Enhertu.
Although treatments like Soliris, one of the world's most expensive drugs that cost hundreds of thousands of dollars per patient, have generated billions in cash, Alexion stocks have struggled in recent years as investors worried about fierce competition.
That had led to it being viewed as a possible bid target.
Hedge fund and activist investor Elliott Management urged Alexion to find a buyer and spoke publicly in May.
The fund, which had held private meetings with the company, said CEO Ludwig Hantson's standalone approach hadn't gained momentum and turned down its plan to buy rivals to diversify its research pipeline.
Elliott first invested in Alexion in 2017, when the share price was just slightly below Friday's close of trading of $ 120.98. Elliott did not immediately respond to a request for comment.
AstraZeneca expected the deal to boost core earnings immediately and generate pre-tax synergy gains of approximately $ 500 million annually. One-time cash costs of approximately $ 650 million are expected in the three years following completion.
On an analyst call, 61-year-old Soriot said the deal was meant to stall speculation on the way out as he was determined to stay on board to see the strategic benefits of the deal delivered.
Soriot also told reporters that the deal was the result of exclusive talks and that there was no competitive bidder involved.
Marc Dunoyer, chief financial officer of AstraZeneca, said that when the deal closes, a capital increase would take place for the equity component of the transaction.
Regarding AstraZeneca's COVID-19 vaccine, Soriot said it was not yet clear whether the company would need results from a clinical trial in the US before it is submitted to US regulators for approval.
Assuming positive results from this study, the company should be able to file the vaccine with U.S. regulators within the next six weeks, he added.