Alexion Pays Hefty $8.4 Billion to Acquire Synageva, Expand Rare Disease Drug Business

CHESHIRE, Conn. (TheStreet) -- Alexion Pharmaceuticals (ALXN) is buying Synageva Biopharma (GEVA) for $8.4 billion to broaden its offering of treatments for rare diseases, the companies announced Wednesday.

The cash and stock deal values Synageva at $230 per share, based on Alexion's average closing price for the past nine days. That's a 140% premium to Synageva's closing price of $95.87 on Tuesday.

Alexion is already one of the most successful marketers of so-called "ultra orphan drugs" -- treatments for rare, genetic diseases which carry gigantic price tags.

Soliris, Alexion's biggest selling drug, costs $500,000 per year and is targeted primarily at the small number of patients with the rare blood disorder paroxysmal nocturnal hemoglobinuria. Soliris sales last year rose 44% to more than $2.2 billion. Alexion's market value is $33 billion, among the largest in the biotech sector.

Acquiring Synageva allows Alexion to expand its orphan drug business, but at a high price. Synageva's most advanced product is Kanuma designed to treat LAL-Deficiency, a rare and deadly inherited disease diagnosed in infants. Kanuma is currently under review in the United States and Europe, with approval decisions expected in the second half of the year.

At $8.4 billion, Alexion is paying between 10 times and 14 times peak sales of Kanuma, according to various analyst forecasts. That's more than double the sales multiple typically seen in biotech acquisitions. Alexion's willingness to pay so much for Synageva suggests the company believes believes there are more LAL-Deficiency patients worldwide to treat with Kanuma than currently predicted, and that the drug will be priced in Soliris territory.

Alexion shares were down 2.4% to $164.50 in pre-market trading.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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