(Another) activist attack on Alexion, as Paul Singer-founded hedge fund calls for biotech to sell itself
“It is highly unusual, if not unprecedented, for a biopharmaceutical company of our size and maturity to proactively launch a sale process,” they wrote. “We do not believe this approach is the best path for driving shareholder value.”
Alexion’s leadership was writing in response to an internal activist attack from Elliott Advisors, a hedge fund that has pressured the board since it took a stake in the biotech in 2017. Now Elliott is back and, for the first time, calling publicly for an outright sale of the company.
The Paul Singer-led hedge fund, known for its company-warping attacks in a number of industries, took particular issue with Alexion’s $1.4 billion acquisition of the blood disorder biotech Portola, a move that was widely panned by investors and led to an immediate $1.7 billion shave off the market value, per Elliott’s calculations. Elliott said the move was emblematic of the mismanagement that had led to their previous, private battering of criticism at the end of 2019.
“Nearly half a year later, with heightened urgency amidst a public health crisis and considerable economic turmoil, the market continues to render a decisive verdict for Alexion’s “go-it-alone, trust-us” approach,” they wrote in a public letter to the board of directors. “The announcement of your acquisition of Portola – and the harsh negative market reaction that followed – offers the latest evidence in support of our view that the Board is taking Alexion in the wrong direction, and that the Company’s current strategy is unlikely to restore the market’s perceptions of Alexion’s attractiveness and uniqueness.”
With Alexion holding a market value of over $22 billion, a buyout would likely be one of the largest biotech acquisitions in recent memory, and it’s unclear who would put up the cash. Although the Connecticut-based company has generated consistent revenue by charging over half-a-million dollars per year for its blood disorder drug Soliris, patent protection on the drug expired in 2017. The company’s strategy has consisted largely of switching over patients to the more convenient and similarly priced Ultomiris, but rivals — such as a new drug from Apellis and an Amgen biosimilar — are emerging.
At JP Morgan, shortly after the last Elliott attack, Alexion predicted it would treat four times as many neurological patients with its drugs — a claim that raised analysts’ eyes, who wondered where the patients would come. Alexion is still awaiting 2021 readouts on ALS and other rare disorders.
In a note to investors, SVB Leerink’s Geoffrey Porges echoed Elliott’s concerns. The company has executed well on its stated strategy, he wrote, but its acquisitions have been questionable and the stock has cumulatively underperformed.
“We agree that the most immediate and obvious value creation opportunity would be the sale of the company to a larger acquirer, and concur that Alexion’s portfolio would be a good fit with a number of much larger companies that have significant interests in rare disease treatments already,” he said.