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* Astra to pay $60 in cash, $115 in equity per Alexion share
* To finance equity component with capital increase
* Expects deal to immediately boost core earnings
(Adds details on cash call, CEO, drugs acquired)
By Ludwig Burger
FRANKFURT, Dec 12 (Reuters) - Britain's AstraZeneca
has agreed to buy U.S. drugmaker Alexion Pharmaceuticals
for $39 billion in its largest ever deal, diversifying
away from its fast-growing cancer business in a bet on
rare-disease and immunology drugs.
The deal comes in a week that AstraZeneca said it was
conducting further research to confirm whether its COVID-19
vaccine could be 90% effective, potentially slowing its rollout,
and as a rival shot from Pfizer was launched in Britain
and approved for use in the United States.
The British company said on Saturday that Alexion
shareholders would receive $60 in cash and about $115 worth of
equity per share - either in AstraZeneca's UK-traded ordinary
shares or in dollar-denominated American Depositary Shares.
Based on a reference average ADR price of $54.14, that
implies a total price of $175 per share. Alexion shares closed
at around $121 apiece on Friday.
"It is a tremendous opportunity for us to accelerate our
development in immunology, getting into a new segment of
disease, a new segment of physicians, and patients we haven’t
been able to cover so far," AstraZeneca Chief Executive Pascal
Soriot told a media call.
Alexion's best-selling drug is Soliris, used against a range
of rare immune-disorders including paroxysmal nocturnal
hemoglobinuria (PNH), which causes anaemia and blood clots, and
whose revenue rose 3.6% in the first nine months to $3 billion.
Astra hopes that an improved version of Soliris called
Ultomiris has an even larger market potential. It expects more
growth from introducing the target's rare-disease treatments to
China and other emerging markets.
The British firm said the boards of both companies had
approved the deal which is expected to close in the third
quarter of 2021.
AstraZeneca was once seen as leading the race to develop a
COVID-19 vaccine, but has fallen behind Pfizer and its partner
BioNTech, as well as Moderna, whose shots
have shown greater efficacy in late-stage clinical trials.
With a planned capital increase of about $25 billion after
the deal closure, Soriot is looking to harness a strong advance
by Astra stock, driven by the stellar growth of new cancer
drugs.
The shares have climbed about 70% through the past three
years. A precursor cash call, on a much smaller scale, was a
$3.5 billion issue last year to fund the purchase of rights to
cancer drug Enhertu from Daiichi Sankyo.
RARE DISEASES
Despite generating billions in cash from treatments such as
Soliris, one of the most expensive drugs in the world costing
hundreds of thousands of dollars per patient, its shares have
struggled in recent years as investors have worried about
competition heating up.
That has made it seen as a possible bid target.
Hedge fund and activist investor Elliott Management has
urged Alexion to seek a buyer and in May spoke out publicly.
The fund, which had held private meetings with the company,
said CEO Ludwig Hantson’s go-it-alone approach had failed to
gain traction and opposed its plan to buy rivals to diversify
its research pipeline.
Elliott first invested in Alexion in 2017 when the share
price was only slightly lower than Friday's close of $120.98.
Elliott did not immediately respond to a request for comment.
AstraZeneca said it expected the deal to immediately boost
core earnings and to deliver pretax synergy gains of around $500
million per year. It also expects around $650 million in
one-time cash costs during the three years following completion.
Speaking on an analyst call, 61-year-old Soriot said the
deal should put to rest speculation he was on his way out, as he
was determined to stay on board to see the strategic benefits of
the transaction delivered.
Soriot also told reporters the deal was the result of
exclusive talks and no competitive bidder was involved.
AstraZeneca finance chief Marc Dunoyer said a capital
increase for the equity component of the transaction would take
place on closure of the deal.
On AstraZeneca's COVID-19 vaccine, Soriot said it wasn't yet
clear if the company would need results from a U.S. clinical
trial before filing for approval with U.S. regulators.
Assuming positive results from that trial, the company
should be able to submit the vaccine to U.S. regulators within
the next six weeks, he added.
(Additional reporting by Rebecca Spalding, Svea Herbst-Bayliss
and Aishwarya Nair
Editing by Mark Potter and David Holmes)
