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AstraZeneca to acquire Alexion

Updated: Feb 9

Pharmaceutical giant AstraZeneca is set to acquire Alexion for $39 billion in a deal advised by Evercore and Centerview Partners

PRESENTATION OF EVERCORE


Evercore

Founded in 1995 in New York, Evercore is a major independent investment banking advisor focused on mergers and acquisitions (M&A), strategic shareholder advisory, restructurings, and capital structure.

In recent years, Evercore confirmed its strong presence on the market, especially in M&A.

Both in FY2019, and FY2020 it ranked amongst the ten major investment banks by the number of deals, and value (respectively 287.9 and 641.6 $bn).

It is one of the leading independent advisors, and it is now aiming to consolidate its business in EMEA focusing on retails and industrials.

The healthcare team is guided by François Maisonrouge, an outstanding healthcare banker, who has successfully grown the division in the last years.



Certerview

Centerview partners operates predominantly in the US, where in 2020 ranked fourth for global M&A deals amongst boutique banks, with an overall 2.1% market share.

The firm is well-known for its healthcare team, ran by Alan Hartmann, which in the last year gained an 18% market share and earned $230m in fees, outperforming giants such as Goldman Sachs and Morgan Stanley. Despite being currently less developed in EMEA, it has established a FIG (financial institutions group) team in 2019, and it inaugurated a Paris hub in 2020, aimed at creating an office outside London for the post-Brexit era.

Centerview is now striving to gain a higher market share in continental Europe, especially in France, whilst increasing the value of its M&A deals.



FIRM OVERVIEW

AstraZeneca

AstraZeneca was born in 1999, out of the merger of the Swedish Astra AB and the British Zeneca group. It is a global biopharmaceutical company that focuses on the discovery, development, and commercialization of prescription medicines.

The company operates in three main areas: Oncology, Cardiovascular & Metabolic Disease (CVMD), and Respiratory disease. However, the firm is now known for its immunology department and the development of the COVID-19 vaccine alongside Oxford university.

Since the early 2010s, AstraZeneca has been steadily growing through an ongoing M&A activity. The acquisitions of Almirall (2014) and Takeda (2016) respectively for 2$bn and $575m, and of ZS Pharma for $2.7 bn in 2015, lead to the growth of a company which now totals revenues for $24bn and counts 70,600 employees.



Alexion

Alexion is a Boston based, industry leader in the world of rare disease treatment. Over its illustrious 25-year history, it has grown into a cutting-edge multinational which generates over $4,991.1m in revenue, while focusing on ‘transforming the life’ of thousands living with debilitating illnesses. Specifically, Alexion has developed treatments for Ahus, FXa Bleeds, gMG, HPP, LAL-D, NMOSD and PNH. The firm prides itself on the invaluable help it receives from a community of patients living with rare diseases, particularly during inhouse clinical trials. This constant interaction between firm and patients during all phases of treatment production is said to be one of the cornerstones of Alexion's success.


“Alexion has established itself as a leader in complement biology, bringing life-changing benefits to patients with rare diseases. This acquisition allows us to enhance our presence in immunology” - Pascal Soriot, CEO AstraZeneca

INDUSTRY OVERVIEW

The recent pandemic has pushed the pharmaceutical industry under the spotlight. Prior to 2020, Big Pharma generated over $1,062bn, with industry leader Pfizer totalling over $41.5bn in profits during the past year.


The pharmaceutical industry is also one of the largest recipients of Research and Development (R&D) money: over $39bn were invested by European pharmaceutical firms during 2020. The research process is often exceedingly expensive in terms of both time and capital. The typical medical product takes between 10 to 13 years to reach store shelves and only 1 in every 10,000 active substances ever achieves market worthiness. Despite the many hurdles faced by producers, recent innovations within the research phase have contributed to shortening the development cycle. For instance, Big Data has been employed to increase the speed and efficiency with which data is processed, particularly during the trial phase.


Despite the growing displacement of all phases of drug production towards emerging economies, over 795,000 people are employed in Big Pharma across Europe. Furthermore, 2.385 million people are involved in peripheral activities linked with treatment production and distribution. As such, the prosperity of the pharmaceutical industry is heavily linked with the wellbeing of the economy at large.



DEAL STRUCTURE

The deal is expected to close at the end of Q3 in 2021 for a total consideration of $39.4bn.

More specifically, the Alexion price per share is $175 and its shareholders are expected to receive $60 in cash plus 2.1243 AstraZeneca American depositary shares. Overall, Alexion shareholders will own approximately 15% of the combined companies.

The deal will initially be financed with $13.5bn in cash then completed with $25.9bn in AstraZeneca ADSs/shares.


Until closing, both companies will continue to operate as separate entities. Afterwards, it was decided that current senior members of Alexion’s management team will remain at the lead of rare-diseases activities. Alexion employees will be provided the same level of salary as before closing for 12 months with the aim of offering no less favorable opportunities than the ones granted before the closing.

Regarding the governance of the firm, two members of the Alexion board of directors will be designated to join the AstraZeneca board upon closing.


Note that closing is subject to satisfaction of several conditions such as approval by AstraZeneca and Alexion shareholders, it therefore cannot be considered as certain that the acquisition will be completed.


DEAL RATIONALE


AstraZeneca and Alexion share a common strategy of delivering best-in-class therapy and fostering innovative science.

Through this acquisition, AstraZeneca accelerates its strategic and financial development.

The union is bound to increase the global immunology presence of the group as well as strengthening its pipeline through several clinical development programs.

The pharmaceutical giant aims at creating opportunities for shared-learning, unifying Alexion’s specialization in rare diseases and the related technologies and its high-touch model with its own strong history in primary care.


Moreover, the geographical presence will also expand, merging Alexion’s Headquarters in Boston and its manufacturing center in Ireland with the already broadly-spread AstraZeneca in emerging markets as well as in the UK and in the US.


A financial reinforcement is expected through improved profitability and strengthened cash flows.

The core operating margin should significantly increase in the short term, accompanied by a continued margin expansion.

A double-digit Earnings per Share is forecast for the first three years coupled with strong cash flow and rapid debt deleveraging aimed at increasing dividends. Along with these elements, a strong investment-grade credit rating is targeted in order to provide strategic and financial flexibility to the union.


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