Why AstraZeneca is acquiring rare disease specialist Alexion for $39bn
AstraZeneca says it will strengthen its arm in immunology and rare disease medicine through the $39billion acquisition of Alexion.
The Cambridge-based biopharmaceutical unveiled its plans on Saturday, when it confirmed that the boards of both companies had unanimously approved the acquisition, which could be completed in the third quarter of 2021, subject to shareholder and regulatory approval.
Shares in AstraZeneca fell by six per cent on Monday as investors pondered the deal, which values Boston-based Alexion at a 45 per cent premium on its previous closing price.
But for AstraZeneca the rationale was clear: the deal brings with it a strong pipeline, a scientific platform and extends its scientific areas into the field of immunology, the importance of which has arguably only been underlined by the Covid-19 pandemic.
Announcing the deal, CEO Pascal Soriot said: “Alexion has established itself as a leader in complement biology, bringing life-changing benefits to patients with rare diseases.
“This acquisition allows us to enhance our presence in immunology. We look forward to welcoming our new colleagues at Alexion so that we can together build on our combined expertise in immunology and precision medicines to drive innovation that delivers life-changing medicines for more patients.”
A dedicated rare disease unit will be headquartered in Boston, with members of Alexion’s leadership team at the helm.
This is a seen as a high-growth area - and there is enormous unmet medical need for AstraZeneca to target. More than 7,000 rare diseases are recorded, but only about five per cent have treatments approved by the US Food and Drug Administration.
The expense of developing new drugs for a relatively small market has proved prohibitive in the past, but the advent of new technologies, such as the use of AI in drug development, is accelerating progress in this area.
That is reflected in forecasts that the global rare disease medicines market will grow by a low double digit percentage in the coming years. The EvaluatePharma World Preview reports that the orphan drug market - targeting such rare diseases - is expected to double from $127bn sales in 2019 to $255bn in 2026.
AstraZeneca will gain a new pipeline of 11 molecules from Alexion across more than 20 clinical-development programmes.
Among Alexion’s portfolio is Soliris (eculizumab), a monoclonal antibody approved in many countries for the treatment of paroxysmal nocturnal haemoglobinuria (PNH), atypical haemolytic uremic syndrome, generalized myasthenia gravis and neuromyelitis optica spectrum disorder. In 2010, it was priced as the most expensive drug in the world at about $409,500 a year in the United States, and a number of governments entered into protracted negotiations over its price over the coming years.
More recently, the company launched Ultomiris (ravulizumab), a second-generation C5 monoclonal antibody also used to treat PNH, a potentially life-threatening disease in which there is excessive breakdown of red blood cells.
Alexion brings scientific expertise in the complement cascade - part of the innate immune system that enhances the ability of antibodies and phagocytic cells to deal with invaders and damaged cells.
It plays an important role in many inflammatory and autoimmune diseases, including therapy areas such as haematology, nephrology, neurology, metabolic disorders, cardiology, ophthalmology and acute care.
Aided by the new unit, AstraZeneca foresees its expertise in genomics, precision medicine and oligonucleotides being brought to bear on medicines targeting less-frequent diseases.
The companies say the deal will “bring together two rapidly converging, patient-centric models of care delivery”.
Mr Soriot told a media call: “It is a tremendous opportunity for us to accelerate our development in immunology, getting into a new segment of disease, a new segment of physicians, and patients we haven’t been able to cover so far.”
Alexion’s shareholders will own around 15 per cent of the combined company.
Dr Ludwig Hantson, CEO of Alexion, said: “For nearly 30 years Alexion has worked to develop and deliver transformative medicines to patients around the world with rare and devastating diseases. I am incredibly proud of what our organisation has accomplished and am grateful to our employees for their contributions.
“This transaction marks the start of an exciting new chapter for Alexion. We bring to AstraZeneca a strong portfolio, innovative rare disease pipeline, a talented global workforce and strong manufacturing capabilities in biologics.
“We remain committed to continuing to serve the patients who rely on our medicines and firmly believe the combined organisation will be well positioned to accelerate innovation and deliver enhanced value for our shareholders, patients and the rare disease communities.”
In 2019, Alexion delivered 21 per cent year-on-yea growth, achieving $5bn in revenues.
The deal is expected to “significantly enhance cash generation”, AstraZeneca said, as well as unlocking around pre-tax synergies of around $500m per year from the combined group by end of the third year. The combined company expects to deliver double-digit average annual revenue growth by 2025.
AstraZeneca has entered into a $17.5bn bridge-financing facility, provided by Morgan Stanley, J P Morgan Securities and Goldman Sachs to finance the deal.
Meanwhile, the company is awaiting UK regulator approval for the Covid-19 vaccine it has been working on with Oxford University.
In the US, however, Mr Pangalos expects the FDA to await the outcome of its ongoing trials in the States. AstraZeneca is halfway through recruitment of 30,000 patients there.
AstraZeneca also received EU approval for Trixeo Aerosphere (formoterol fumarate/glycopyrronium bromide/budesonide) to treat adult patients with moderate to severe chronic obstructive pulmonary disease (COPD).
And its trastuzumab deruxtecan drug with Daiichi Sankyo has been recommended for conditional marketing authorisation in the EU as a monotherapy for the treatment of some patients with unresectable or metastatic HER2-positive breast cancer.
Earlier this month, AstraZeneca agreed to sell the rights to Crestor (rosuvastatin) and associated medicines in more 30 countries in Europe, excluding the UK and Spain, to Grünenthal for an upfront payment of $320m and potential future milestone payments of up to $30m.
Crestor is a statin approved for the treatment of dyslipidaemia and hypercholesterolaemia.