* Roche seeking financing for potential Alexion bid- sources
* Alexion valued at more than $22 billion
* Some investors question logic, see deal as pricey
By Caroline Copley
ZURICH, July 14 Buying Alexion Pharmaceuticals
Inc would help Roche make a splash in the
newly lucrative area of rare or so-called orphan diseases, but
it could command a price that the Swiss drugmaker is ultimately
not willing to pay.
Two people familiar with the matter have told Reuters that
the Basel-based firm is seeking financing for a potential bid
for Alexion, which specialises in the treatment of rare
The sky-high prices and lower development and marketing
costs of treatments for orphan diseases are increasingly drawing
the attention of big pharmaceutical companies as their older
drugs lose patent protection.
A bid for Alexion would mark an attempt by Roche to
diversify beyond its core cancer competencies through
acquisitions, following a string of failures from its own
research operations for drugs to treat cardio metabolic
But some investors in an impromptu survey by analyst Mark
Schoenebaum of ISI group were concerned about the likely
Shares in Alexion currently trade at 32 times forecast
earnings for the next 12 months, according to Thomson Reuters
data, more than double Amgen Inc's 13.2 times and at a
premium to Biogen Idec Inc's 24.1 times.
"Quite frankly, I don't like this deal. It risks being
overpriced. Most of the U.S. is in a bubble," said Helvea
analyst Olav Zilian.
Alexion shares surged 12.6 percent on Friday to close at
$114.26 on the Nasdaq, valuing the company at more than $22
billion. Roche has declined to comment on the potential bid.
Despite only treating a few thousand patients worldwide,
sales of Alexion's rare blood disease drug Solaris are forecast
by analysts to reach $1.5 billion this year. Citi analysts
forecast peak sales for Alexion of $6 billion in 2025.
With Roche's top-selling medicines expected to come under
pressure from cheaper copies known as "biosimilars" from 2016, a
buyout of Alexion would give them a good product with little
competition, said Citi analyst Andrew Baum.
But the steep prices charged for orphan drugs are under
growing scrutiny from cash-strapped healthcare providers,
principally governments, that are increasingly having to balance
the acute needs of a few against the wider interests of society.
Kepler Cheuvreux analyst Fabian Wenner questioned whether
Roche investors would sanction such an expensive deal.
"Would it make sense from a value accretion point of view?
No way. Roche shareholders are unlikely to be very happy about
the price, and Roche management knows this."
Roche walked away from a $6.8 billion bid last year to buy
U.S. gene-sequencing company Illumina after shareholders,
holding out for a higher offer, blocked its move to gain seats
on the firm's board.
Even so, ultra-low interest rates make it a good time for
After paying down debt from its 2009 takeover of Californian
biotech Genentech for nearly $47 billion, Roche is soon expected
to be back within its target range for a net debt to total
assets ratio of 0-15 percent, so they have room to take on more.
Roche has also earned a reputation as a hard negotiator, and
Citi analysts said in a report before New York's market close on
Friday that they might not have to pay a particularly large
premium. Using the highest recent valuation multiple of 15 times
revenue, they estimated a premium of 10-15 percent.
But buying Alexion, which currently only sells one drug,
would signal a change of tack for Roche, whose recent shopping
list has focused on companies developing technology platforms.
"I believe shareholders will want to see Roche spend money
on things that make sure the company is still at the bleeding
edge of technology in 20 years from now," Wenner said.