ii view: AstraZeneca's Alexion deal clears EU hurdle

Covid vaccine success and a move into rare disease treatments. We assess prospects. 

Alexion Pharmaceuticals EU Clearance

Chief Financial Officer Marc Dunoyer said: 

“The proposed acquisition would enhance the company's scientific presence in immunology by adding Alexion's innovative complement-technology platform and an extensive pipeline. Rare diseases represent a high-growth disease area with rapid innovation and significant unmet medical needs. Shareholders of both companies overwhelmingly supported the acquisition by their votes on 11 May 2021.”

ii round-up:

Biopharmaceutical company AstraZeneca (LSE:AZN) today received EU regulatory clearance for its acquisition of rare disease treatment maker Alexion Pharmaceuticals (NASDAQ:ALXN).

Cambridge headquartered Astra launched its $39 billion bid for USA headquartered Alexion back in December 2020. 

AstraZeneca shares moved marginally higher in UK trading and have risen by around 7% since launching the bid back in mid-December. The acquisition is expected to be immediately accretive to core earnings. Shares for major UK rival GlaxoSmithKline (LSE:GSK) are up by just over 1% in that time.  

Alexion specialises in drugs to treat rare diseases and the immune system. The acquisition will help extend Astra’s own immunology drug portfolio while adding medicines for rare diseases. The purchase marks Astra’s biggest ever deal.

The acquisition has already been cleared by competition authorities in the US, Japan and other countries and now requires approval from the UK. 

First-half AstraZeneca results are scheduled for 29 July.

ii view:

AstraZeneca is a global, science-led biopharmaceutical company which operates in over 100 countries. Oncology, or cancer drugs at just over two-fifths of overall sales are its biggest segment. Respiratory and immunology products generate another fifth of sales, with Cardiovascular, Renal and Metabolism (CVRM) compounds providing a third area of strength. Tagrisso, to treat cancer, and Symbicort in the respiratory and immunology arena were its two biggest selling drugs in 2020, generating 16% and 10% of overall revenues respectively. 

But development and approval of its Covid-19 vaccine clearly headed events for AstraZeneca during 2020. The making and supply of millions of doses of the non-profit vaccine to both the UK and other governments provides its top priority during 2021. Away from the vaccine, Alexion will both strengthen its immunology and respiratory product portfolio and add the treatment of rare diseases to its prospects. Over 7,000 rare diseases are known of but only around 5% have US Food and Drug Administration (FDA)-approved treatments. 

For investors, time spent developing and rolling out its coronavirus vaccine is time away from its core business. The purchase of Alexion at what many analysts consider to be a full price is yet to justified. However, its Covid vaccine has raised its global profile significantly. Astra intends to build on its own geographical footprint and extensive emerging markets presence to accelerate the worldwide expansion of Alexion's drug portfolio. Alexion revenues grew by 21% year-over-year to $5 billion in 2019, and a maintained AstraZeneca dividend payment and an historic yield of over 2% is also not derisory in an era of ultra-low interest rates. In all and given both vaccine and other new drug successes over recent years, innovation clearly remains high, which is arguably the core ingredient for long-term pharmaceutical company success.   

Positives: 

• New medicines accounted for 52% of 2020 total revenues
• Alexion adds to its diversity of drug treatments

Negatives:

• Respiratory & immunology sales retreated by 1% over 2020
• Other medicine sales including those where patents have expired fell by 4% over 2020

The average rating of stock market analysts:

Strong buy