Is Astrazeneca's for bid American rival a deal too far?

It was a moment of maximum peril for Astrazeneca. 

The British drugs giant was laid low and attempting a turnaround, but the raiders were at the gate. 

Smelling an opportunity, American rival Pfizer swooped with a £69billion takeover bid which bosses hoped would cut costs and shrink its tax bills. 

But in the ensuing struggle, Astra boss Pascal Soriot rallied his company’s defences and managed to fight off the raider, insisting that his firm had a strong future ahead of it. 

Eight years later – and after a thrilling comeback that proved him right – the charismatic Frenchman and Astra are seizing the moment themselves with a transatlantic takeover. The Cambridge-based pharmaceuticals group is offering £29billion for Boston-based rival Alexion, in a cash-and-shares deal that seeks to take advantage of its strong share price. 

It would be the largest deal in Astra’s history, cementing the company’s transformation from prey to predator since the Pfizer battle. 

Soriot, 61, has pitched the takeover as a way for AZ to gain a foothold in potentially lucrative treatments for rare diseases, particularly those caused by problems in the immune system, which Alexion specialises in. The US company is already known for its flagship blood disease drug Soliris and has followed this up with Ultomiris, which was approved two years ago and has seen sales quadruple to £572m in the first nine months of 2020. 

Astrazeneca said yesterday the deal combines its ‘capabilities in precision medicine and Alexion’s expertise in rare-disease development’. 

It will also lead to £375m in annual savings and that Alexion’s drugs could be rolled out to more markets, such as China. 

But some are questioning whether this is really another stroke of genius from Soriot – who proved critics wrong before – or a step too far. 

For example, analysts claim Alexion’s portfolio of rare disease drugs doesn’t sit naturally with Astra’s own stable of cancer, heart and respiratory treatments. 

There are also doubts about whether Soriot and the firm can pull off a major takeover while juggling the complex roll-out of a Covid-19 vaccine around the world with Oxford University. 

Russ Mould, investment director at AJ Bell, said: ‘Alexion has failed to attract a suitor for some time, despite shareholder pressure, so investors might see Astrazeneca as a bit of a sap for pitching up with a 45pc premium.’ 

Markus Manns of Union Investment, which holds Astra shares, told Bloomberg: ‘If you don’t have cash, don’t buy a large company unless it is a once-in-a-lifetime opportunity and has strong strategic merits. You can hardly call this deal a once-in-a-lifetime opportunity, and the strategic merits are weak.’ 

Despite this, analysts note that Alexion’s shares have been laid low by underwhelming performance and that it does generate lots of cash, making it look like something of a steal. 

Yet intriguingly, Soriot has said the takeover should put to bed persistent rumours that he is about to ride off into the sunset – suggesting his plan for Alexion goes beyond mere financial engineering. The chief executive is betting that the firm’s immunology expertise can be applied to less niche conditions, potentially opening up new avenues of income. It’s an approach similar to the one he took after taking charge in 2012, when Astra faced a sales ‘cliff edge’ as patents on best-selling drugs ran out. 

In his quest to reverse the group’s fortunes, Soriot bet big on innovation, selling the rights to old medicines to boost revenues while pumping billions of pounds into cutting- edge research and development of blockbuster cancer drugs. 

That approach has paid off in a big way, with cancer treatments Tagrisso, Lynparza and Imfinzi winning sales worth billions of dollars per year, transforming Astra from a laggard into an industry leader. 

John Rountree, managing partner at pharma consultancy Novasecta, said Soriot appears to be trying to pull off the same trick again. 

‘I think this is a very good deal,’ he said. ‘The pharma industry is constantly evolving and Astra has clearly done this with intention. This looks to me like a very strategic, long-term bet.’ 

He added: ‘Prioritising innovation has served Astra well so far and Alexion has a rich pipeline of potential assets’ 

But betting on innovation, he admits, is no guarantee of success, with billions of dollars sunk into drug research every year that ends up going nowhere. 

For Soriot, the deal represents another chance to defy predictions and come out on top. Investors will be hoping he still has his mojo.