Activist hedge fund Elliott Associates has renewed its call for rare disease specialist Alexion Pharmaceuticals to sell itself, to take advantage of a surge in the valuation of biotech stocks and interest in companies researching treatments for coronavirus.
Elliott said a sale would be preferable to Alexion staying on its present course, which the fund characterised as a dealmaking spree that has destroyed value for investors.
In a letter to Alexion’s board on Tuesday, Elliott said its “go-it-alone, trust-us” strategy was not working and “the best approach for the company and its stakeholders is the immediate exploration of a sale”.
Elliott’s demand to put the $26bn company on the block comes at a time when biotech stocks have been outperforming the broader market. The Nasdaq Biotechnology Index has risen close to 10 per cent from the start of the year, while the S&P 500 dropped 10 per cent because of the impact of the pandemic on the broader economy.
“If anything this crisis has outlined how important pharmaceutical companies are to the system, society and the patients,” a person familiar with Elliot’s thinking said. “There may or may not be an acquirer for this company today, but Elliott thinks there is some interest and you need to have some kind of spark that triggers the discussion.”
Alexion recently announced it would start testing its blockbuster drug ultomiris on coronavirus patients who had been hospitalised with severe pneumonia or acute respiratory distress syndrome, two complications that arise from Covid-19.
In December, Alexion publicly rejected Elliott’s earlier recommendation to put itself up for sale and said it had not received any interest from potential buyers. The $40bn-in-assets hedge fund, which is run by founder Paul Singer, first built a stake in Alexion in 2017 but has not disclosed its exact size.
Elliott complained Alexion’s value had been hit by a $1.4bn deal to buy Portola, a San Francisco-based company with one commercially-approved medicine which specialises in life-threatening bleeding disorders. It called the deal a “far cry from the kind of nimble rare-disease tuck-ins it needs” and criticised Alexion’s decision to pay a 130 per cent premium to Portola’s share price.
In the announcement of the acquisition, Alexion’s chief executive Ludwig Hantson said Portola would help the company diversify beyond treatments for rare blood disorders.
Shares in Alexion declined more than 5 per cent when the deal was announced. A 2.7 per cent gain on Tuesday after Elliott’s sale call took the stock back to its level before the deal.
“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,” Elliott wrote in a letter.