Alexion Pharmaceuticals Inc on Wednesday agreed to buy smaller biotech Achillion Pharmaceuticals Inc in a deal initially valued at $930 million, as the company looks to retain its leadership in treating certain rare blood disorders.
Alexion, which is paying a 73% premium, is eyeing Achillion’s two experimental treatments for the rare blood disorder, paroxysmal nocturnal hemoglobinuria (PNH), a market it has dominated with its flagship drug Soliris.
The drug now faces patent challenges, and the company is fighting back by converting patients to a Soliris successor drug called Ultomiris, which won U.S. approval last year, and analysts said Wednesday’s deal will support the strategy.
“The transaction has strong strategic rationale as a defensive play for Alexion versus competitors,” Evercore ISI analyst Josh Schimmer said, adding that the deal would allow Alexion to preserve Ultomiris’ market share and defend its franchise.
Soliris, which also treats atypical hemolytic uremic syndrome, recorded sales of $3.56 billion last year, accounting for about 86% of the drugmaker’s total revenue.
But the “obvious, and quite significant overlap in therapeutic focus” between the two companies could invite a challenge from the Federal Trade Commission (FTC), according to SVB Leerink analyst Geoffrey Porges.
Alexion Chief Financial Officer Aradhana Sarin acknowledged such concerns during a conference call with analysts.
“We’ll just have to go through the FTC process and address the questions the FTC raises,” she said.
Achillion shareholders will receive $6.30 per share held and are eligible to get another $2 per share subject to certain considerations, the companies said. The deal is expected to close in the first half of 2020.
Shares of Achillion surged 74% to $6.35, while Alexion stock dipped 1.8% to $102.98.
PNH, which affects 1-1.5 persons per million of the population and is primarily a disease of younger adults, is a rare, life-threatening disorder in which red blood cells are prematurely destroyed by the patient’s immune system.
For Achillion, which shifted focus to treating blood disorders after Johnson & Johnson (JNJ.N) backed out of a collaboration to develop a hepatitis C treatment in 2017, the deal is a “big win”, said SVB Leerink analyst Joseph Schwartz.
Alexion, which is rebuilding after a series of setbacks in the past few years, is also beefing up its portfolio of drugs for other rare diseases.
The company bought Sweden’s Wilson Therapeutics for $855 million and followed that up with the purchase of Syntimmune for a total value of up to $1.2 billion.
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