Alexion has withstood its fair share of gales in recent years after a wholesale shakeup at the top and a shift toward an M&A-focused strategy underway. Now, despite one activist investor’s call for a “proactive” sale, Alexion’s board has decided to stay the course.
Alexion’s directors opted not to pursue a sale after a “good faith” conversation with Elliott Advisors—an affiliate of infamous proxy brawler Elliott Management, which requested the sale, the company said.
“It is highly unusual, if not unprecedented, for a biopharmaceutical company of our size and maturity to proactively launch a sale process,” Alexion said in a release. “We do not believe this approach is the best path for driving shareholder value.”
As part of its rebuttal to Elliott’s request, the board touted its corporate strategy, including its “M&A leadership, including evaluating, negotiating and executing on numerous mergers, acquisitions and sales of major companies throughout their careers.”
Evercore ISI analysts wrote in a note to investors Friday a sale was both unlikely and undeserved given Alexion’s “efficient business model” and relatively blameless management.
“Strategically we generally agree with each of the execution steps and decisions (Alexion) has made,” they wrote. “There really hasn’t been anything this new management team has done which we feel is misaligned with shareholder interests.”
Alexion’s pivot to M&A has coincided with a minor shakeup at the top after CFO Paul Clancy––a “careful steward” of the company’s finances, according to one analyst––was replaced in September by Aradhana Sarin, M.D., Alexion’s chief strategy and business officer responsible for the drugmaker’s $2 billion in recent pipeline acquisitions.
In Sarin, who joined Alexion in 2017 as senior vice president and head of business development and corporate strategy, Alexion elevated an “unknown quantity” due to her lack of C-suite experience, SVB Leerink analyst Geoffrey Porges said at the time of the transition.
“Without (Clancy’s) steadying hand, investors are likely to be concerned about more uncertainty in quarterly performance, more volatility in profitability and operating results and bigger surprises in business development announcements,” Porges wrote. “At this stage, despite Dr. Sarin’s strong reputation, in our view there’s no basis for arguing this transition will be positive for the stock or for investors’ interests.”
A month after that transition was announced, Alexion ponied up $930 million to acquire Achillion, a developer of oral small-molecule factor D inhibitors for indications like paroxysmal nocturnal hemoglobinuria (PNH), which Alexion’s Soliris and Ultomiris both cover.
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“Were we to ever receive legitimate and actionable proposals, the board would evaluate them in accordance with their fiduciary duties and act in the best interest of all shareholders,” the company said.
Porges found that lack of interest to be “surprising,” he said in a Friday note to investors.
“It suggests that potential large biopharma companies don’t have the either the appetite, resources, or interest in consummating a large transaction for Alexion’s assets,” Porges wrote.
Apart from building its pipeline, Alexion is currently in the midst of a gung-ho switching campaign from its stalwart blockbuster Soliris over to successor drug Ultomiris, a process the company has called “unprecedented” in its success.
In mid-October, Alexion reported the majority of patients previously taking Soliris for PNH had switched over to Ultomiris, putting the successor well on its way to reaching a 70% U.S. conversion rate in that indication by mid-2020.
With the process going better than planned, Alexion is feeling secure that it will have enough support to weather the likely storm Soliris will face once patent protection ends. In late August, the U.S. Patent and Trademark Office launched a review of Soliris’ U.S. patents after Amgen requested a broad challenge.
Soliris currently makes up around 88% of Alexion’s sales and isn’t expected to face biosimilar challengers for several years—2022 in the EU and 2027 in the U.S.
