Roche, the world’s largest maker of cancer medicines, has been in contact with Cheshire, Connecticut-based Alexion on and off for months, said another person, who asked not to be named because the process is private. There is no guarantee a deal will happen.
Alexion has a single approved drug, Soliris, which can cost patients as much as $400,000 a year, among the world’s most expensive therapies. The medicine is approved to treat two rare blood diseases affecting fewer than 20,000 people. A purchase of Alexion, which had a market value of about $20 billion before Bloomberg News’s report, would give Roche control of the $1.13 billion product as the Basel, Switzerland-based company faces setbacks in its drug research and development.
“Roche has had a number of pipeline failures,” Les Funtleyder, a health-care strategist at Poliwogg, a New York investment firm, said yesterday in a telephone interview. “On the first page of the pharma playbook is: ‘If you have pipeline failures, do an acquisition.’”
The Swiss drugmaker has struggled to bring projects outside its cancer business to fruition. The company said July 10 it suspended testing of its most advanced experimental diabetes drug over safety concerns. Roche also halted development of its cholesterol drug dalcetrapib last year and abandoned the diabetes drug taspoglutide in 2011.
The company made a $6.7 billion hostile offer for Illumina Inc. last year to gain gene-sequencing equipment. Roche, led by Chief Executive Officer Severin Schwan, abandoned the bid after Illumina shareholders held out for a higher price.
A takeover of Alexion would be Roche’s largest since the company bought the portion of Genentech Inc. it didn’t already own for $46.8 billion four years ago, the biggest biotechnology deal on record, according to data compiled by Bloomberg.
As an orphan drug, designed for a small number of patients with few treatment options, Alexion’s Soliris receives enhanced marketing exclusivity and is usually covered by insurers, making it valuable to potential acquirers.
“A business like this can be seen as attractive to any number of players,” Christopher Raymond, an analyst with Robert W. Baird & Co. in Chicago, said yesterday in a telephone interview. Soliris “is the closest thing to an annuity you have in biotech; you have a drug that is life-saving for a patient and it’s a chronic therapy, so you have that patient for life.”
Alexion climbed 13 percent to $114.26 yesterday in New York, the biggest single-day gain since October 2008. Roche’s American depositary receipts fell less than 1 percent to $64.
Alexion’s shares climbed as much as 24 percent in intraday trading yesterday, matching a potential premium Roche could be expected to offer, Poliwogg’s Funtleyder said.
“Historically, acquirers in biotech have tended to offer a 20 to 30 percent premium over the last close,” Funtleyder said. Such a premium would yield a deal price of more than $24 billion, based on Alexion’s 195.2 million shares outstanding. “This is a very large deal, but it wouldn’t surprise me to see a number like that.”
Before Bloomberg reported Roche’s interest, Alexion traded for about 34 times this year’s estimated earnings, the second-highest valuation among biotechnology companies larger than $5 billion, according to data compiled by Bloomberg. The industry fetched a median price-earnings ratio of 25, the data show.
Alexion was founded in 1992 by Chief Executive Officer Leonard Bell and Joseph A. Madri, a professor at Yale University School of Medicine and a current member of the board. At the time, Bell was a 33-year-old physician and assistant professor of medicine at New Haven, Connecticut-based Yale.
The company won U.S. Food and Drug Administration approval for Soliris’s first use, in paroxysmal nocturnal hemoglobinuria, or PNH, a disorder of the red blood cells, in 2007. PNH affects fewer than 10,000 patients in the U.S., according to the Mayo Clinic. Without treatment, as many as 35 percent of patients die within five years of diagnosis.
In 2011, the drug was cleared to fight atypical hemolytic uremic syndrome, or aHUS, in which clots form in small blood vessels, leading to organ damage.
Alexion is the latest biotechnology company to attract takeover interest. Last month, Onyx Pharmaceuticals Inc. said it rejected an unsolicited $120-a-share cash takeover bid from Amgen Inc. The offer, valuing Onyx at about $10 billion, was 38 percent more than Onyx’s closing price of $86.82 on June 28.
“It appears that we’re entering a period of froth in biotech in terms of acquisitions,” Funtleyder said. “When you enter a period that’s a little frothy, anything is possible.”