Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) struck a deal to buy the rare disease biotechnology firm Synageva for $8.4 billion. The deal is in both cash and stock that will give the shareholders of Synageva high premium and is another proof of the sky-high valuations in the biotechnology industry.
Alexion is giving 0.6581 of its share for each share of Synageva in addition to $115 per share. This roughly values the share of Synageva at $230 per share. The share of Synageva is currently trading at $85.87 for a market cap of $3.5 billion. The deal presents a remarkable premium of 135% to the shareholders.
Much of Synageva’s value is derived from its late stage drug Kanuma which designed to treat cases of early onset of lysomal acid lipase deficiency that is a genetic disease that kills infants in months. The drug was given breakthrough designation in 2013 by the FDA. The FDA also accepted filing for market application of the treatment with decision due in September. Given the breakthrough status of the drug the drug may get approval even before the deadline.
He rare disease focus of Synageva fits the strategy of Alexion. Alexion won big with the approval of Soliris, which is the most expensive therapy in the world. The therapy sold for more than half a million dollar a year for the treatment of blood disorder paroxysmal nocturnal hemoblobinuria. The market for the drug is expanding around the world, and it has led to fast revenue growth for Alexion. Alexion will be well placed to benefit from therapy like Kanuma.
After the deal is finalised, Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) plans to cut costs as it incorporates Synageva into the company. The cost cutting is likely to lead to job losses. Analysts are also wondering whether Alexion expects to increase the price of Kanuma. The drug has been designated “potential blockbuster” by Ian Somayia of Nomura Equity.
