Alexion valuation could choke any Roche bid

Sun Jul 14, 2013 9:18am EDT
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By Caroline Copley

ZURICH (Reuters) - Buying Alexion Pharmaceuticals Inc (ALXN.O: Quote) would help Roche ROG.VX make a splash in the newly lucrative area of rare or so-called orphan diseases, but it could command a price that the Swiss drug maker 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 specializes in the treatment of rare diseases.

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 diseases.

But some investors in an impromptu survey by analyst Mark Schoenebaum of ISI group were concerned about the likely valuation.

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 (AMGN.O: Quote) 13.2 times and at a premium to Biogen Idec Inc's (BIIB.O: Quote) 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.   Continued...

The logo of the Swiss drugmaker Roche is seen on a factory in Burgdorf near Bern, Switzerland in this November 17, 2010 file photo. REUTERS/Pascal Lauener