Investors are uncertain about the acquisition’s merits, due to Alexion’s huge price tag and its relatively meager contribution to AstraZeneca’s future.
British-Swedish vaccine developer AstraZeneca PLC is acquiring the Boston, Massachusetts-based rare diseases specialist Alexion Pharmaceuticals Inc. in a bid to secure a post-coronavirus expansion for the company.
In a deal worth some US$39 billion, AstraZeneca will be acquiring Alexion in what will be the biggest deal in AstraZeneca’s history if approved.
Alongside its American competitors Pfizer Inc. and Moderna, Inc., AstraZeneca has been at the center of the global race to develop an effective vaccine that could bring an end to the coronavirus pandemic.
There was recently some confusion regarding just how effective AstraZeneca’s COVID-19 vaccine is, with full trials showing the vaccine was 62% effective in preventing contraction of the coronavirus but another, smaller trial showing an efficacy rate of 90% among those who’d only received a half dose.
Some experts have also challenged AstraZeneca’s findings, conducted alongside the University of Oxford, on the grounds that the trials failed to include the necessary number of individuals from older age groups and a wide range of ethnicities and that, as a result, the trails fail to provide an accurate efficacy rate among the population most vulnerable to COVID-19.
AstraZeneca chief executive officer Pascal Soriot has hailed the company’s acquisition of Alexion as one that will “drive innovation that delivers life-changing medicines for more patients.”
However, the British pharmaceutical company’s investors are uncertain about the acquisition’s merits, due to Alexion’s huge price tag and its relatively meager contribution to AstraZeneca’s future.
Alongside the American pharmaceutical companies Pfizer and Moderna, AstraZeneca has become a household name in the last year.
Unlike the vaccines developed by Pfizer/BioNTech and Moderna, which rely upon messenger RNA (mRNA) as its base, the vaccine under development by AstraZeneca in conjunction with Oxford researchers is more traditional.
Scientists developing the vaccine used a modified virus that causes the common cold in chimpanzees, removing small amounts of the genetic material that causes the illness and replacing them with a fragment of the genetic code for the novel coronavirus.
This method is known as a “viral vector vaccine” and is among the easiest vaccines for scientists to replicate.
Alongside its simpler design, AstraZeneca’s vaccine has a number of other factors working in its favor. It is likely to be the cheapest vaccine on the market, around US$4 a dose, after an agreement was reached between AstraZeneca and researchers that the vaccine would be provided on a not-for-profit basis worldwide during the pandemic.
AstraZeneca’s vaccine also has logistical benefits lacking in Pfizer’s mRNA shot, which must be stored at super-cold temperatures.
On the contrary, the AstraZeneca vaccine can be stored at fridge temperature, which Sir Jeremy Farrar, head of the Wellcome Trust charity, says removes the difficulties of having to “store vaccines on dry ice,” which presents logistical and distribution challenges.
But likely the biggest downside, so far, to the AstraZeneca vaccine are its somewhat underwhelming efficacy results.
After a confusing announcement, AstraZeneca released the full trial data in the medical journal The Lancet. The data showed that the vaccine could have an efficacy rate of 90% in smaller, half doses, but that overall it had an overall efficacy of some 62%, results that caused AstraZeneca shares to drop considerably.
Both Pfizer’s and Moderna’s vaccines reported efficacy rates of around 95%.
The United States Food and Drug Administration (FDA) has also expressed concerns over the conditions of the trial, including a lack of older participants and those from a wide range of ethnicities, which could result in approval of the vaccine taking longer to achieve in the US.
Although its trial results appear underwhelming in comparison to its competitors, AstraZeneca has nonetheless already begun to consolidate its position in a post-coronavirus world.
The company’s US$39 billion acquisition of rare diseases specialist Alexion in a stock-and-shares deal is the first step toward this.
AstraZeneca’s main business is in oncology – the study and treatment of cancer. In its acquisition of Alexion, AstraZeneca is stepping into the lucrative rare diseases market.
AstraZeneca referenced this in a statement announcing the deal, noting that the acquisition of Alexion means “the combined company is expected to deliver double-digit average annual revenue growth through 2025,” due to the “high-growth therapy area” that is rare disease treatment.
Alexion’s main product, Soliris, is a treatment for a rare blood disease known as “paroxysmal nocturnal hemoglobinuria” and is one of the most expensive drugs in the world.
But investors have not seen eye-to-eye with AstraZeneca in its latest deal.
Shares in the pharmaceutical company slumped to a nine-month low after news of the deal surfaced, with analysts questioning the deal’s cost and the overall benefit to AstraZeneca.
In comments to Bloomberg, Markus Manns of Union Investment said that “if you don’t have cash, don’t buy a large company unless it is a once-in-a-lifetime opportunity and has strong strategic merits.” In Manns’ view, the purchase of Alexion isn’t a “once-in-a-lifetime opportunity, and the strategic merits are weak.”
AstraZeneca may have also overpaid to acquire the company. The US$39 billion the company paid represents a 45% premium on Alexion’s pricing, with AstraZeneca taking out a US$17.5 billion loan to finance the deal.
The long-term benefits for AstraZeneca are also questionable. AstraZeneca’s main products are facing patent expiry, as is Alexion’s expensive Soliris drug, negating any major long-term benefit to the deal.
As analysts from Intron Health argue, AstraZeneca has “financially engineered their way out of” short term problems, but has “stored up even bigger issues for the future.”
Although AstraZeneca’s vaccine will likely be made more widely available than its main competitors, due to its cost and better storage requirements, this is unlikely to net the company any long-term profit.
Similarly, as investor activity has shown, the market isn’t confident that the acquisition of Alexion will either.
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