RARE Daily

Activist Shareholder Pushes Alexion to Find a Buyer

May 13, 2020

Rare Daily Staff

Elliot Advisors, in a letter to Alexion Chairman David Brennan, expressed frustration over the company stock’s “persistent underperformance” and blasted its recent $1.4 billion acquisition of Portola Pharmaceuticals as it called on Alexion to explore a sale as the best way for shareholders to get a return.

The dialogue between the company and the activist shareholder had been largely private but following a $1.7 billion loss in market capitalization as investors reacted negatively to the recent Portola merger announcement, Elliot decided to go public. Elliot had previously made the case for a sale to Alexion, but management pushed back last December seeking more time to prove its prospects as a standalone company.

“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,” the letter said. “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. We believe that this board is in urgent need of fresh perspectives and a new direction.”

The letter argued that Alexion has been a “persistent underperformer” with a 75 percent drop in EV/EBITDA multiple since 2015. It called Alexion the worst performer across the broader large-cap biopharma sector. It said Alexion’s shares trade at a 40 to 50 percent discount to fair value.

It charged that several missteps have reinforced a negative sentiment among investors toward Alexion including its 2019 acquisition of Achillion and 2020 acquisition of Portola as the company sought to rebuild its pipeline and diversify away from complement 5 inhibitors. For Elliot, the sharp drop in value in response to its acquisition strategy reflects the market’s sentiment that it is the wrong direction for the company.

The letter praised Alexion CEO Ludwig Hanston and his team for navigating a difficult time since joining the company in 2017. It noted he joined at a time of turmoil and uncertainty and took steps to stabilize the company and set the stage for growth. Among the accomplishments under his tenure was the approval and launch of Ultomiris, the successor to Soliris.

But given the uncertainty in the global economy and the needs large potential acquirers have to build their rare disease franchises, Alexion would be a strategic acquisition to a number of companies.

“We respectfully urge the board to acknowledge the limitations of the current strategy in light of the Company’s persistent underperformance and to act with urgency in exploring strategic alternatives,” the letter said. 

Photo: Alexion CEO Ludwig Hanston

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