Alexion Pharma to buy Synageva BioPharma for $8.4 billion

By Vidya L Nathan and Ankur Banerjee

REUTERS - Drugmaker Alexion Pharmaceuticals Inc said it would buy Synageva BioPharma Corp for $8.4 billion at a hefty premium to expand in the lucrative market for drugs that treat rare diseases.

Makers of drugs that treat rare diseases are seen as attractive takeover targets because of their revenue-generating potential as they typically charge high prices for their products.

With the deal, Alexion will have eight experimental rare disease drugs under its belt, including Synageva's potential money spinner kanuma.

The drug, whose marketing application is being reviewed in the United States and Europe, treats a rare disease called Lysosomal Acid Lipase Deficiency, where a build-up of fatty material in the blood and liver causes unexpected complications and early death in some cases.

Kanuma is expected to touch peak sales of $603 million in 2020, according to Thomson Reuters Cortellis.

Alexion's cash-and-stock offer values Synageva at $225.92 per share - more than double of Synageva's closing price of $95.87 on Tuesday.

Synageva's shares were trading at $215 just after the opening bell, while Alexion was down 5 percent at $159.

The deal provides a windfall for Synageva shareholders, particularly Baker Brothers Investments, which own about 32 percent of the company. The firm stands to make $2.68 billion from the transaction.

"We believe Synageva as a good fit given Alexion's expertise in developing and commercializing products for rare diseases," UBS analyst Matthew Roden wrote in a note.

Alexion's sole product on the market, Soliris, raked in $2.23 billion in 2014. The drug is the only approved treatment for two potentially fatal conditions that can damage vital organs.

The deal is the latest in a string of M&As in the healthcare sector this year.

Recent deals involving rare disease drug makers include Teva Pharmaceutical Industries Inc's $3.5 billion purchase of Auspex Pharmaceuticals and Shire's acquisition of NPS Pharmaceuticals for $5.2 billion.

Alexion is offering $115 in cash and 0.6581 of its shares for each share of Synageva.

The deal is expected to add to Alexion's 2018 profit, while allowing $150 million in cost savings in 2017, the companies said. [ID:nBwbgxjVSa]

Alexion has received committed financing of $3.5 billion from Bank of America Merrill Lynch and JPMorgan for the deal.

Lazard and JPMorgan were Alexion's financial advisers, while Goldman Sachs advised Synageva.

Wachtell Lipton Rosen & Katz is Alexion's legal counsel, while Sullivan & Cromwell LLP and Ropes & Gray LLP are Synageva's legal counsel.

(Reporting by Vidya L Nathan and Ankur Banerjee in Bengaluru; Editing by Savio D'Souza and Saumyadeb Chakrabarty)