⚕️ How Much is Treating Rare Diseases Worth?

AstraZeneca agreed to buy US-based Alexion Pharmaceuticals, as it diversifies into rare-diseases and immunology drugs

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Friday Close) 3,663.46 −4.64 (0.13%)

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USDINR (5 PM IST) 73.53 (1 Year +4.15%)

How Much is Treating Rare Diseases Worth?

$39B is the answer, at least for AstraZeneca. The British pharma giant agreed to buy US-based Alexion Pharmaceuticals, making the acquisition its largest deal yet, as AstraZeneca diversifies into rare-diseases and immunology drugs.

Background: AstraZeneca was a front-runner for developing the Covid-19 vaccine before Pfizer and Moderna broke away to get their respective vaccines on the path to approvals first. Given the company has been on the defensive on the vaccine front, this deal gives some much-needed respite to CEO Pascal Soriot.

The company’s stock has been on a tear, having risen by 70% in the past three years. Its cancer drug portfolio has driven much of this growth. The acquisition of Alexion allows AstraZeneca to harness its stock price and provides access to a set of drugs and a pipeline that will complement its existing portfolio.

What Happened? Alexion had been at the receiving end from activist investor Elliott Management, forcing the company to seek a buyer. The company’s shares have struggled in the face of increasing competition. This, despite having one of the most expensive drugs on the planet in its portfolio – Soliris. The drug, used for treating rare immune disorders, costs hundreds of thousands of dollars per patient and has brought in revenues of $3B in the first nine months this year.

Every shareholder of Alexion will receive $60 in cash and $115 worth of equity in AstraZeneca, which works out to 2.1243 American Depository Shares. Given Elliott Management invested in Alexion about three years ago at ~$120 per share, that works out to ~13.5% return for the hedge fund.

AstraZeneca also envisions Soliris and its successor version named Ultomiris, to have high growth in China and other emerging markets. The combined entity is expected to have a dozen blockbuster drugs by 2023, each generating over $1B in sales.

The deal has been approved by the boards of both companies and is expected to close in Q3 of 2021. AstraZeneca expects synergies of $500M per year to kick-in immediately and incur $650M in one-time cash costs within three years of integration.

Market Reaction: On Friday, AstraZeneca shares closed at $54.27, up 0.71%. The stock is down 5.56% in pre-market trading. Alexion closed at $120.98, up 1.78%. The stock is up 32.46% in pre-market trading today.

Company Snapshot 📈

AZN $54.27 +0.38 (+0.71%)

ALXN $120.98 +2.11 (+1.78%)

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Later Today 🕒

Before Market Opens: Granite Construction Inc Earnings (GVA)

Fun Fact of The Day 🌞

The largest recorded earthquake in the world was a magnitude 9.5 in Chile on May 22, 1960

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