AstraZeneca To Buy MedImmune: Did They Overpay?

As everyone will have heard by now, AstraZeneca (AZN) opened up the wallet but good yesterday, offering over 15 billion dollars for MedImmune (MEDI). There was pressure on both sides, from what I understand. AZ has had a rough time of it the last few years, with several major clinical disappointments (one of which, Iressa, actually managed to stagger and lurch onto the market). For its part, MedImmune's big shareholders seemed to think that they weren't getting quite the value they thought the company was worth. Yesterday's offer is about a 20% premium to the previous stock price, so maybe that should cheer them up.

This is part of what seems to be a general blurring of the small-molecule and biologic worlds. One the one side, you have deals like this (and Merck's foray into RNAi, etc.), but at the same time the big biotech players are doing more small molecule work. Genentech (DNA), after some fits and starts over the last ten or fifteen years, is ramping up their traditional drug discovery (which I know since two of my former colleagues recently got hired out there). Amgen has a pretty good-sized effort, in both California and Cambridge, but (as I was talking to some people yesterday about), no one really seems to know what they're doing yet with all that money and talent.

Did AstraZeneca overpay? I'm a fine one to ask, since to me all these deals look overpriced. They have a better idea of what MedImmune's pipeline looks like than anyone on the outside (they'd better!), so I have to assume that they were able to massage the numbers into something reasonable. But the thing about these deals is that, in the end, there's really no way of knowing whether they're going to work out or not. You can get some fuzzy idea of the odds, but there are so many confounding factors that even the best thought-out move is still a leap out of an airplane. Good luck to all concerned...