fb-pixel Skip to main content

Despite no drugs on market, Lexington biotech fetches $8b

Synageva BioPharma Corp. chief executive Sanj Patel (center) rang the opening bell at the Nasdaq Stock Market in 2011.
Synageva BioPharma Corp. chief executive Sanj Patel (center) rang the opening bell at the Nasdaq Stock Market in 2011.Mark Lennihan/Associated Press/File/Associated Press

A Connecticut company agreed Wednesday to pay a staggering $8.4 billion for a little-known Lexington biotech, marking one of the biggest US biotech transactions of the year and raising fresh questions about whether such blockbuster buyouts are justified.

Synageva BioPharma Corp., a seven-year-old company developing treatments for rare diseases, has kept such a low profile that many industry watchers — and even people in Lexington — have never heard of it. It currently has no drugs on the market.

But that didn't stop Alexion Pharmaceuticals Inc. from snapping up Synageva for more than double the price the company's stock commanded the previous day.


The deal, once completed, would be the second-largest acquisition ever of a Massachusetts biotechnology company, after Sanofi's $19.6 billion takeover of Genzyme Corp. in 2010.

"This is an eye-popping price tag," said Maxim Jacobs, senior health care analyst at Edison Investment Research in New York. "The valuations have obviously gotten stretched. Synageva is a good company, but Alexion is paying a [giant] premium. . . . It's not really sustainable."

Many were perplexed about how Synageva's business could be worth so much. The company's most advanced product, which could be approved for use later this year, targets a disease estimated to afflict just 3,000 people in the developed world.

The deal to buy Synageva follows several other recent biotech industry mergers that came with whopping prices. Roche AG purchased InterMune Inc. for $8.3 billion last year, and AbbVie Inc. disclosed last month that it plans to pay about $21 billion to purchase Pharmacyclics Inc.

In a report last month, a biotech stock analyst, Geoffrey Porges from the financial firm AllianceBernstein, suggested that Vertex Pharmaceuticals, of Boston, could fetch $45 billion from Gilead Sciences Inc. if the companies merge. Vertex has a current stock market value of about $30 billion.


"It's incredibly frothy," said Mark Williams, a finance and economics professor at the Boston University School of Management. "I had to read it [Synageva] twice just to pronounce it. Is this an early warning that these valuations are too rich? Each deal seems to be leapfrogging the last one. This industry is priced to perfection, but some of these companies will eventually stumble."

Synageva and its chief executive, Sanj K. Patel, have been a quiet presence on the Boston- area business scene. Lexington economic development director Melisa Tintocalis said company officials visited her just once in the past 18 months — to get approval to put up a sign.

"Weren't they the Italian company?" she asked, acknowledging local officials knew little about Synageva. "They keep a low profile."

Synageva has 165 employees at its corporate headquarters, a lab in Lexington, and another site in the Central Massachusetts town of Holden. It received $1.8 million in tax breaks from the Massachusetts Life Sciences Center in 2012 and 2013 in exchange for creating jobs. Another $900,000 was earmarked this year, though that has not yet been paid out.

The company is working on a pipeline of drugs to treat rare genetic disorders. Its lead drug candidate, called Kanuma, has shown effectiveness in clinical studies treating LAL deficiency, a very rare enzyme disorder.

A review of Kanuma has been fast-tracked by the Food and Drug Administration, which is expected to decide later this year whether to approve the drug for sale in the United States.


Patel, Synageva's chief executive, is a veteran of the Cambridge biotech Genzyme, a leader in enzyme replacement therapies that was itself bought by Sanofi. Under its legendary leader Henri A. Termeer, Genzyme pioneered a widely imitated strategy of bringing expensive but effective drugs to market for rare diseases ignored by the rest of the pharmaceutical industry. Synageva representatives did not respond to calls and e-mails requesting interviews Wednesday.

Not everyone agreed Alexion had overpaid for Synageva.

Citing other recent buyouts, biotechnology analyst Howard Liang, at Leerink Partners said: "It's not a cheap deal, but it depends on what Alexion can make of Synageva's lead product, Kanuma."

Alexion, based in Cheshire, Conn., is valued at $33.6 billion on the strength of a single drug, Soliris, which treats patients with an ultra-rare life-threatening blood disorder called paroxysmal nocturnal hemoglobinuria. The list price of the drug, which is covered by insurance for most patients, is more than $500,000 a year per person.

In an interview, Alexion chief executive David Hallal defended the price his company agreed to pay for Synageva but declined to say if it was driven so high by a bidding war.

In addition to Kanuma, the Lexington company has at least a half-dozen other drugs in earlier stages of development.

"We're confident that the valuation is appropriate, given Synageva's strategic and operational fit with Alexion," Hallal said. "The value of the lead drug in their pipeline is worth more in our hands than anyone else's. Synageva was a company trying to build the next Alexion. In what they're trying to do, we see what we did yesterday — a company working on drugs to treat really bad diseases where people die early, organs are lost early, and we can treat these people."


Alexion has 2,500 employees worldwide, including 100 workers at sites in Cambridge as a result of smaller purchases and a research collaboration. Hallal said it was too early to determine whether Alexion will keep the Synageva sites in Lexington. But he said his company's latest deal "highlights the importance of the Boston biotech industry to Alexion."

Synageva was formed in 2008 to focus on rare diseases. It had 282 full-time employees at the end of 2014, according to its annual report.

Patel, 45, earned $7.1 million last year but would get a larger payout under the merger. His outstanding option awards as of Dec. 31 would be worth about $103 million at the deal price.

Alexion has lagged the biotech industry's stock-market surge, with its shares rising 93 percent in the past three years.

“Is it overvalued?” asked Lexington health care industry consultant Harry Glorikian. “That answer only comes after you’ve done the integration and done the work. If they wind up getting eight drugs [from Synageva] that treat 11 different diseases, that $8 billion could be a really good number. They might be able to make this work.”

Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW. Jack Newsham can be reached at jack.newsham@globe.com. Follow him on Twitter @TheNewsHam.