AstraZeneca Agrees to Buy Alexion for $39 Billion

The deal would bolster the British drug giant’s footprint in rare diseases

LONDON— AstraZeneca AZN 0.71% PLC said it agreed to buy Boston-based Alexion Pharmaceuticals Inc. ALXN 1.78% for $39 billion in cash and stock, a move that would bolster the British drug giant’s footprint in rare diseases.

The deal comes at a pivotal time for AstraZeneca, which is in late-stage development of a leading Covid-19 vaccine developed in partnership with the University of Oxford. The vaccine is being reviewed by U.K. and European drug regulators, and could be authorized for emergency use in the U.K. within weeks, scientists involved in it have said.

The company has embarked on one of the most ambitious efforts to manufacture and distribute the vaccine among a handful of Western pharmaceutical giants, assuming it gets the green light for its shot. With the Alexion deal, it will also now be trying to orchestrate a giant corporate merger at the same time.

AstraZeneca said Alexion will give it a foothold in the lucrative field of rare-disease drugs and help fuel revenue and cash flow in the coming years. The bulk of Alexion’s $6 billion in annual sales comes from Soliris, which treats a rare blood disorder. It is among the most expensive drugs in the world.

AstraZeneca executives said the deal would help expand Alexion’s drug sales in new markets, particularly China. It would also improve profit margins by eliminating expenses over three years, by reducing infrastructure costs such as office space and distribution centers.

Directors of both companies have approved the acquisition, which they expect to close in the third quarter of 2021. The Alexion deal will be AstraZeneca’s last large acquisition for the near-term, said Chief Financial Officer Marc Dunoyer.

AstraZeneca has reinvented itself in recent years as a cancer-drug powerhouse. It had suffered years of shrinking revenue as blockbusters in its portfolio were hit by generic competition when patents expired.

AstraZeneca said its cash-and-stock agreement amounts to $175 per Alexion share, based on the one-month average value of AstraZeneca’s U.S.-traded American depositary receipts. The offer is split between $60 in cash and 2.1243 American depositary shares. That represents a 40% premium over Alexion’s one-month share-price average, AstraZeneca said. Alexion’s shares closed Friday at $120.98.

The acquisition terms provide that Alexion will be liable to pay a break fee of up to $1.2 billion to AstraZeneca in certain instances that lead to the deal not being completed. AstraZeneca will be required to pay Alexion a break fee of $1.4 billion.

The companies have been talking for several months, said AstraZeneca Chief Executive Pascal Soriot. Dr. Soriot said that the disruption should be minimal for AstraZeneca’s work rolling out a global Covid-19 vaccine, adding that for a deal this attractive, “You do it when the opportunity arises.”

He and Mr. Dunoyer told reporters on a call Saturday that AstraZeneca and Alexion don’t overlap a great deal geographically, and Alexion’s roughly 3,000 employees will be fairly simple to integrate.

AstraZeneca expects to have regulatory approvals by the third quarter, possibly sooner, by which time they will be well into the vaccine rollout, the executives said. “Our belief is that by Q3 the world won’t have returned to total normalcy, but close enough,” Dr. Soriot said.

By agreeing to buy Alexion, AstraZeneca is aiming to diversify a portfolio that had become heavily focused on cancer drugs and into one of the pharmaceutical industry’s most dynamic areas—the market for therapies for rare diseases.

Rare-disease drugs are attractive to drugmakers because they don’t need large sales forces and can charge high prices that health insurers are typically willing to pay because they only have one or two members requiring the treatment.

Other big drugmakers have paid up to enter the rare-disease drugs market. Most recently, in 2018, Takeda Pharmaceutical Co. agreed to buy Shire for $62 billion. In 2017, Johnson & Johnson agreed to buy Actelion for $30 billion.

Still, Soliris’s patent protection is waning, and the drug faces potential competition that could undercut sales. In June, Alexion reached a legal settlement with Amgen Inc. to delay its launch of a copycat drug until 2025.

The delay gives Alexion crucial breathing room to persuade doctors to switch their patients onto a new drug called Ultomiris that is protected from U.S. competition until at least 2030. The company says the advantages of Ultomiris over Soliris include less frequent shots and a lower price. The average annual cost of Soliris is about $600,000, and $458,000 for Ultomiris, an Alexion spokeswoman said.

Soliris sales are expected to be $4.2 billion globally this year, according to FactSet; Ultomiris sales are projected to be $1.1 billion.

In 2016, Alexion’s chief executive and chief financial officer were forced to step down during a company investigation into improper sale and accounting practices. David Brennan, a former AstraZeneca chief executive on Alexion’s board, took over on an interim basis.

Ludwig Hantson took the helm of Alexion in 2017, promising to revamp the company’s business culture and soon began cutting costs through workforce reductions and paring down its R&D pipeline.

The deal comes as AstraZeneca has suffered setbacks in its Covid-19 vaccine development. It has faced criticism over disclosures around an early clinical-trial dosing mistake and a range of recent vaccine-effectiveness results that confused outside researchers, some of whom called for more data before authorization of the shot.

AstraZeneca executives said Saturday in a briefing with reporters that the vaccine is on track to be available soon for mass inoculations. Dr. Soriot said that will happen “over the next few weeks” in some countries and in January in others.

He said the company’s U.S. clinical trial, delayed earlier this year while unexplained adverse reactions in volunteers were investigated, is going well and should produce late-stage results in January.

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