Alexion Pharmaceuticals (ALXN) is swinging wildly after the company on Friday canceled an appearance at a health-care investor conference. The firm also failed to file a 10Q report with the U.S. Securities and Exchange Commission as quickly as it usually does, fueling speculation that Alexion is either dealing with something bad or is an imminent takeover target.
Alexion shares jumped 14% early in Friday's session, but later swung into negative territory and were down more than 3% on the day at one point. Alexion was trading at $123.95 at last check, some 2.8% lower for the session.
The pharmaceuticals firm's shares initially rose after Alexion abruptly nixed an appearance at a conference. Of course, starting a takeout rumor when a company bows out of an investor conference is a staple of speculators' playbooks, and nine times out of ten, such rumors aren't true. But Alexion's stated reason for canceling was that "something came up" -- a bit odd, although the statement could mean anything.
Adding to the speculation is the fact that Alexion reported third-quarter earnings on Oct. 27 but has yet to file it's 10Q with the SEC even though it's eight days later. ALXN has historically files quarterly reports within a day or two of announcing financial results.
Let's play along with the speculation for a moment and look at the pros and cons of an Alexion takeover:
Why a Deal Makes Sense
Sure, Alexion is a credible biotech acquisition target. The company markets three ultra-orphan disease drugs -- including Soliris, the world's most-expensive drug. While politicians and the drug industry fight over pharmaceuticals prices in general, companies that develop and market therapies for rare diseases remain largely protected from such criticism. With few exceptions, insurance companies don't even balk at paying for rare-disease drugs because so few patients require these medicines.
Alexion is also one of the few large-cap biotech companies that doesn't rely on price increases to drive much revenue growth. Alexion is expected to deliver $3.1 billion in sales this year, which should grow to $3.6 billion in 2017 and $4.3 billion in 2018, according to FactSet.
Why a Takeover Doesn't Make Sense
An acquisition of Alexion would be no small financial feat. Given the firm's ciurrent market cap of nearly $31 billion, a takeout would likely cost an acquirer $40 billion to 50 billion or more if you apply typical takeout premiums. Pfizer (PFE) just paid $14 billion to acquire biotech company Medivation Inc., so an Alexion deal would be an order of magnitude larger.
The Bottom Line
Roche Holding (RHHBY) reportedly looked at buying Alexion in 2013 but found the deal too expensive to justify. However, maybe Roche is looking again. Or Novartis (NVS) , Pfizer, Gilead Sciences (GILD) , AstraZeneca (AZN) or Sanofi (SNY) . Take your pick.