Why Boston-Bound Alexion Could be a Compelling M&A for Larger Drugmakers

With 2018 expected to be a big year for mergers and acquisitions in the biopharma industry, analysts and investors are considering who the top targets might be. And Alexion Pharmaceuticals currently headquartered in New Haven, Connecticut, but moving to Boston, is a top contender.

That’s not new. Alexion was mentioned in a list of top targets in early December, a list that included BioMarin Pharmaceutical, Vertex Pharmaceuticals and Incyte Corporation.

Alexion focuses on rare diseases. Its products include Soliris (eculizumab) for patients with paroxysmal nocturnal hemoglobinuria (PNH), atypical hemolytic uremic syndrome (aHUS), and anti-acetylcholine receptor antibody-positive generalized myasthenia gravis. It also has Strensiq (asfotase alfa) for hypophosphatasia (HPP) and Kanuma (sebelipase alfa) for lysosomal acid lipase deficiency. It also has a strong pipeline.

The last couple years have been a challenge for the company. In May 2015, it received a subpoena regarding an investigation by the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) asking for information related to grant-making activities and compliance with the Foreign Corrupt Practices Act (FCPA) in several countries. The data was related to Alexion’s recalls of specific lots of Soliris, as well as related securities disclosure.

In late November and early December 2016, the company delayed its quarterly filing because of an internal investigation based on a whistleblower’s allegations about Soliris sales. The company’s chief executive officer and chief financial officer left the company as a result. About the same time, its attempts to diversify by acquiring Synageva for $8.4 billion fell apart, and sales of Soliris started to decline.

Ludwig Hantson, formerly president and chief executive officer of Baxalta, took over in March 2017. Just prior to his joining the company, its interim CEO David Brennan, had cut 7 percent of the company’s workforce, more than 200 people.

But the company appears to be on far firmer footing. Sean Daly, writing for Seeking Alpha, says, “Expanding indications for Soliris and the introduction of ALXN1210 will drive revenue, widen margins and keep competitors at bay for another decade. The company is clearly now positioned to be an inexpensive ‘tuck-in’ or ‘bolt-on’ for a larger player. In tandem to these fundamental drivers, Alexion’s recent price action is suggesting the doldrums are over.”

In  October, the U.S. Food and Drug Administration (FDA) approved Soliris for adults with generalized myasthenia gravis (gMG) who are anti-acetylcholine receptor (AchR) antibody-positive. There’s a potential market in the U.S., Europe and Japan of about 14,000 patients.

Hantson said in a recent statement, that he expects “the gMG opportunity and [its] launch will be at or above” the previous launches for PNH and aHUS. In addition, he is “very pleased with physician and patient enthusiasm,” and expects “acceleration of treatment initiation as we enter the beginning of the year.”

Geoffrey Porges, an analyst with Leerink Partners, recently projected Soliris sales in 2022 for gMG alone at $1.2 billion.

Daly’s bottom line appears to be that with its business house back in order, a strong pipeline, and Soliris proving to be a stunningly successful drug, Alexion should be an attractive target for bigger companies interested in the rare disease market.

“Alexion has built up an extraordinary suite of data via Soliris in PNH and aHUS—ultra-rare diseases in which it is difficult recruiting even 20 patients for drug implementation,” Daly writes. “There is a lot of institutionalized knowledge at Alexion. Its niche expertise, its effective (if recently besmirched) sales force, and its first-mover status in ultra-rare disease makes it an attractive acquisition.”