Alexion Pharmaceuticals became one of the biggest public companies in Massachusetts overnight by moving its headquarters to Boston less than three years ago.
But it wasn’t meant to last. Alexion, with 3,800 employees and nearly $6 billion in anticipated annual revenue, is being sold, gobbled up. British drug giant AstraZeneca inked a $39 billion biotech buyout over the weekend. Alexion will, in all likelihood, be subsumed within a year’s time by a much larger biopharma buyer — either AstraZeneca, or perhaps another bidder willing to pay an even higher price.
Easy come, easy go? Well, not exactly.
The Greater Boston biotech cluster is now the envy of the world. Rather than bemoan the loss of a corporate giant, local business leaders are looking on the bright side. AstraZeneca said it plans to make Boston its headquarters for its rare disease business — led by senior members of Alexion’s management team, presumably at Alexion’s shiny new Seaport offices that it first occupied in mid-2018. That’s a good sign, especially for the roughly 800 people that Alexion employs here.
One big reason behind AstraZeneca’s decision: the desire to capitalize on all the biotech talent in the Boston area.
That was also a big factor in Alexion’s relocation to Boston from New Haven in the first place. (The company was founded by a Yale professor in 1992.) You can’t blame chief executive Ludwig Hantson if he had hoped to use the Boston move to give Alexion a fresh start, after he was recruited to help the company bounce back from a scandal involving its sales practices.
Vertex got to the South Boston waterfront first. But Alexion’s arrival in the Seaport presaged a recent wave of life sciences development in that part of the city, one that has continued at a healthy clip during the COVID-19 pandemic.
Alexion, though, has been dogged by a listless stock price. Its stock peaked at more than $200 in 2015, but took a hit amid an internal investigation into allegations of improper marketing tactics for its blockbuster blood-disease drug Soliris. The shares never really recovered; they traded in the $120 range last week before news of the AstraZeneca deal broke. The $39 billion deal offers investors a 45 percent premium over the closing stock price Friday. That might sound like a princely amount. But it still values the company at $175 a share, less than what it was worth five years ago.
This seemingly sputtering stock attracted the interest of activist investor Elliott Management about three years ago. At first, Elliott tried to push the company’s management to improve its operations. But after those operational improvements weren’t reflected in the stock price, Elliott publicly agitated for Alexion to be sold. Elliott expressed particular concern about the surprise departure of Alexion’s then-chief financial officer Paul Clancy last year, and a $1.4-billion acquisition of smaller biotech Portola that proved in May to be the proverbial final straw for the investment firm. (Analysts note that Elliott wasn’t the only dissatisfied Alexion investor.)
Before tangling with Alexion, Elliott had already had some significant influence on Boston’s corporate landscape. LogMeIn acquired the GoTo suite of products in early 2017 following Elliott’s agitation at former GoTo parent Citrix. Athenahealth was sold nearly two years ago after Elliott put the squeeze on. The biggest Massachusetts deal, by far, that Elliott helped bring about? EMC’s $67 billion sale to Dell, in 2016.
Along with EMC-Dell, the sale of Alexion will go down as one of the largest buyouts in state history — almost up there with Bank of America-Fleet, P&G-Gillette, and UTC-Raytheon.
But Jim Rooney, chief executive of the Greater Boston Chamber of Commerce, doesn’t seem fazed. Rooney said he expects the federal government to increase funding for medical research in the coming years, particularly with regard to viruses and rare diseases. AstraZeneca’s increased presence should draw more federal funds here, he reasons. Rooney recognizes that any merger brings some job cuts in the C-suite and back office. Even factoring those in, Rooney sees more employment on the horizon, and a long-term boost to the region’s prestige.
The top two biopharma employers in the state happen to be Takeda and Sanofi, big drug conglomerates with overseas headquarters that landed here through acquisitions of prominent local players — Millennium and Shire, under Takeda, and Genzyme, in Sanofi’s case.
Peter Hecht, chief executive of Cyclerion Therapeutics in Cambridge, said the fact that AstraZeneca wants to base its rare disease unit here underscores the maturation he has seen in the region’s biotech industry. As recently as a decade ago, the focus among big biopharma businesses in Boston was more on research. The commercialization side of the business often happened elsewhere. Not anymore.
Inevitably, some top Alexion executives will leave because of the buyout. But they’ll likely stick around in the area, he said, with some maybe starting new biotechs locally, part of a virtuous cycle.
Losing a big, publicly traded company is never much fun — even if it’s one we only had for a few years. But the AstraZeneca-Alexion deal could be good news for Boston’s economy eventually, once we get beyond that initial sense of loss.