Breakingviews: Biotech M&A deal looks too rich for its blood

Alexion Pharmaceuticals is either buying Portola Pharmaceuticals on the cheap at $1.4 billion, or paying a whopping premium – it all depends on your starting date. The deal means the $22 billion biotech snaps up a promising drug to reverse anticoagulants. The target has been on a downward slide for years, with the shares falling about 80% since the medication, Andexxa, was approved in 2018. But the buyer is shelling out a 132% premium based on Monday’s closing stock price. It’s more likely Alexion is overpaying.

Portola’s drug can reverse popular blood thinners already used by more than 16 million patients in the United States and Europe. That number is steadily growing. In perhaps 3% of patients, however, the result is too much bleeding. Andexxa costs tens of thousands of dollars per patient, so good traction in getting it used in these patients would create a blockbuster – and mean Alexion is acquiring a desirable asset on the cheap.

Yet the drug’s $112 million of revenue last year looks distinctly underwhelming. Some of this was teething pains, as there were insufficient quantities available at first. Yet revenue fell between the third and fourth quarters as some hospitals curtailed use of the drug to control costs. That might imply hospitals will reserve it for only the most serious bleeds, which would make the overall market smaller than hoped.

Alexion is gambling it can do a better job selling the drug. The buyer is a bit of a curious fit – it focuses on selling orphan drugs for rare conditions at huge prices – but it does sell to the same customers, so perhaps it can use size to its advantage. The bigger problem is that the premium presupposes success. Investors aren’t confident: They knocked about $1 billion off Alexion’s market capitalization, equating to the entire premium and then some. The deal is already too rich for their blood.

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