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Alexion: Another Deal, Now Portola


  • Alexion Pharmaceuticals has continued to deliver on solid growth while an aggressive acquisition strategy might scare off investors.
  • Shares now trade at just 4 times forward sales, diversification is slowly arriving, and the company has a few deals in the works to bolster the pipeline.
  • Very modest variations mean that I am slowly buying the low valuation, although more selective M&A strategy would likely be welcomed by investors.
  • Looking for more stock ideas like this one? Get them exclusively at Value In Corporate Events. Get started today »

Alexion Pharmaceuticals (NASDAQ:ALXN) surprised the market by announcing an acquisition in the middle of the COVID-19 crisis as it is looking to acquire Portola Pharmaceuticals (PTLA).

Thanks to generous cash flows, Alexion has the means and willingness to be aggressive in deal-making, having announced multiple deals in recent years and recent times. The main business continues to do well with continued impressive growth in sales and very strong earnings, all while multiples have become quite compelling.

Deal Terms

Alexion has reached a deal to acquire Portola in a transaction which values the target at $18 per share in cash as the company will furthermore assume $215 million in net cash held by Portola.

Given that Portola reported a diluted share count of nearly 78 million shares by the end of 2019, this values equity at around $1.40 billion and the entire business at around $1.2 billion.

The offer looks generous on a percentage basis, representing a more than 130% premium, with shares trading in the mid-single digits recently. One has to recognize that shares actually traded in the low twenties at the start of the year and are far removed from levels in the $60s back in 2017.

What Is It All About?

Alexion defends the deal by pointing toward the fact that it will acquire Andexxa, a commercialized medicine as the entire company (Portola) focuses on life-threatening blood-related disorders. The drug has furthermore been approved in Europe, marketed there under the name Ondexxya, being the first and only Xa inhibitor reversal agent, reversing the so-called anticoagulant effect of Xa inhibitors in uncontrolled bleeding.

While FDA approval arrived in mid-2018, a real commercial launch started only in January 2019 as the first phase of commercialization in Europe started last summer.

Alexion cites that the company will see diversification in the

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This article was written by

The Value Investor profile picture
The writer is a long term value investor and M.Sc graduate in Financial Markets with over 10 years experience. Value can be found in both long and short ideas and uses options to enhance the risk-return profile of investment ideas. Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ALXN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (11)

apparently Elliot Advisers agrees with your thesis and started an activist campaign. nice synopsis
The Value Investor profile picture
Quite a coincidence indeed. We will see what happens!
yes very different proflie indeed fro the typical pharma that gives all its cash via dividend or shares buyback. Now making so mnay aquisitions might be a risk also.
But common at this price, they can even afford making few mistakes. I m in for the next years
Dear author. Could you explain me how alxn cost less then 100 with p/e 9 or less after recent report?
with q1 2020 +22.1% Y/Y rev and +22.3% Y/Y q4 2019.
with really small debt
increasing equity y/y
very high margins
Overall, with really good fundamentals.

I just don't understand. And what's the problem with takeovers? I heard from over investors that alxn had small pipeline. But not now. And they expanding it sharply. Including Portola.
The Value Investor profile picture
Concern with ALXN in my eyes is two-fold
1) concern about patent (still > 80%? of sales from 1 (group) of drugs
2) company has spent well over $10bn on deals in recent years, and real diversification still not seen
@Xonda The simple answer is that management has done two things to thwart interest in the stock. 1 they told the market and Elliot that they are not for sale thus crushing any hopes of them being acquired which helped prop up the stock price. 2 as the author pointed out, they spend like drunken sailors on assets and companies that have yet to show any promise or yield any fruit - $13.5 billion in five years in lieu of returning a that money to shareholders where it would've done more good.

Solaris patent issues aside there is enough there to dissuade most investors - add in the patent worries and you have a stock that is declining on multiple fronts:

1.A gross decline relative to their highs of years past.

2.A real decline when marked against inflation (Alexion's assets are being valued less compared to inflation)

3.A relative decline to the market. As the market jumped in value Alexion stayed flat or declined.
reminds me of Guy Adami on Fast Money referring to Mylan Labs as serial wealth destoyers.
Lackluster stock
happy2camp profile picture
Anyone in ALXN took responsibility for the mistake of buying Kanuma for 8 billion? Did anyone resign or get fired?
Kanuma was acquired in 2015
Current CEO came in 2017
CEO, CFO, and founder all booted by BOD.
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