Monday, April 23, 2007

MedImmune Investors Get Paid

In a clearly opportunistic deal AstraZeneca is buying MedImmune for a whopping $15.2 billion ($58 per share). AZ says the acquisition will add significantly to its pipeline and complement the biologics discovery expertise within its Cambridge Antibody Technology unit with development and manufacturing skills and infrastructure. MedImmune also brings AZ for the first time into the vaccines space, an increasingly popular market for Big Pharma.

The price is a 53% premium to MEDI's closing price the day before it announced it was for sale, and 21% above its Friday close. But AZ investors hopeful that for all that cash the Big Pharma would boost its ailing late-stage pipeline (where it has suffered a handful of setbacks in the past few months) aren't likely to be pleased by the deal. MEDI CEO David Mott noted on a call today with AZ analysts that MEDI anticipates having only three to five projects in pivotal trials in the 2009-2010 timeframe. Most of MEDI's $1.3 billion annual revenue comes from sales of the respiratory drug Synagis ($1.1 billion in 2006).

The acquisition was first reported over the weekend by the WSJ ($), which noted their were four pharmaceutical bidders for MedImmune, including AZ and Eli Lilly & Co. The deal is the latest sign of biotechs increased leverage over product-hungry Big Pharma, and will further the agendas of biotech shareholders that argue for immediate satisfaction via M&A.

AZ will finance the cash deal with a variety of debt vehicles, according to AZ CFO Jon Symonds. The refinancing plan hasn't been put in place yet, he says, but "clearly we'll want to preserve our financial capacity to take further opportunities as they come. This is not the end of our externalization ambitions."
The company's next move is anyone's guess. After all, AZ went after MedImmune despite its protestations that it wasn't in the market for such a deal, suggesting Big Pharma in some cases doesn't know what it wants until it's presented with an opportunity--and if biotech investors get their way, many more such opportunities will come AZ and others' way. Just how does the acquisition of MedImmune jive with CEO David Brennan's comments during an extensive and exclusive interview with IN VIVO last month:

Q: Are larger bolt-on acquisitions out of the question?

I never say never. But bigger acquisitions are not really on the radar screen at the moment. We're focused on getting more quality products into the portfolio. Large-company transactions are complicated, painful, and take a lot of effort.

Good luck!

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