Alexion bets $8.4B on Synageva in rare-disease push

PARIS – Alexion Pharmaceuticals Inc. agreed to buy Synageva BioPharma Corp. for $8.4 billion in cash and stock, expanding its collection of treatments for rare diseases to reduce its dependence on a single drug.

Shares of Alexion fell the most in five years as analysts questioned whether it was overpaying. The transaction values Synageva at $230 a share, based on Alexion’s average closing price for the past nine days, the companies said in a statement. That’s more than twice Synageva’s closing price of $95.87 on Tuesday.

Alexion developed a medicine called Soliris, which garnered sales of $2 billion last year, for patients with two rare but life-threatening disorders. The drug is used for a blood ailment known as atypical hemolytic uremic syndrome, which can cause kidney failure. Synageva has similar drugs in development, including a medicine called Kanuma for the organ-damaging condition known as LAL deficiency.

Alexion fell 11 percent to $150.85 at 9:44 a.m. in New York, the biggest intraday decline since May 2010. Lexington, Mass.-based Synageva more than doubled to $204.22.

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While the price is “rich,” the deal makes sense, and Kanuma could reach as much as $1.5 billion in annual sales, Geoff Meacham, a Barclays Plc analyst, said Wednesday in a note. He advises buying Alexion shares.

“It raises questions on what hidden value Alexion sees in Synageva’s pipeline,” wrote Asthika Goonewardene, a Bloomberg Intelligence analyst. “Given the limited contenders in rare diseases, this may also have been a result of a bidding war.”

Alexion has lagged behind the biotech industry’s stock- market surge, with its stock rising 93 percent in the past three years, or about half the increase in the Nasdaq Biotechnology Index.

“A recent area of concern for Alexion has been an overt reliance on Soliris and an inability of the Street to see what compelling product(s) are next,” said Hartaj Singh, an analyst at BTIG, in a note.

Broader portfolio

Along with Kanuma, Alexion’s new drug Strensiq for a metabolic bone disease called hypophosphatasia should eventually help the company broaden its sources of revenue, Singh said.

Alexion is offering $115 in cash and 0.6581 Alexion shares for each share of Synageva, the Cheshire, Conn.-based company said in the statement. The two companies’ boards backed the transaction and it is expected to be completed by mid-2015.

“Synageva is an ideal strategic and operational fit for Alexion that aligns with what we know well and do well — providing life-transforming therapies to an increasing number of patients with devastating and rare diseases,” David Hallal, CEO of Alexion, said in the statement.

Lazard Ltd. and JPMorgan Chase & Co. are financial advisers to Alexion, and Wachtell, Lipton, Rosen & Katz is serving as legal counsel. Goldman Sachs Group Inc. is advising Synageva, and Sullivan & Cromwell LLP and Ropes & Gray LLP are serving as legal counsel.

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