Lilly's next deal: Alexion Pharma?
John Russell [IndyStar]
September 22, 2009
Eli Lilly CEO John Lechleiter often says he doesn't have any use for mega-mergers. But he has made no secret that he wants to buy more small and medium-sized companies.
But which deal make the most sense these days for the struggling Indy drugmaker?
Catherine Arnold, a drug analyst with Credit Suisse in New York, thinks that Lilly's best target is a small biotech, Alexion Pharamaceuticals, which focuses on autoimmune and cardiovascular diseases.
Alexion's leading product is Soliris, approved in the U.S. and Europe in 2007, which treats a rare blood disorder.
In a 48-page report to clients today, Arnold discusses the pros and cons of dozens of possible industry deals, including the one.
Alexion, based in Cheshire, Conn., appears to be the right size company for Lilly to acquire. It has about 500 employees and annual revenues of $259 million.
"Alexion would bring Lilly a product with blockbuster potential (Soliris) and growth in 2012 and beyond, when LLY needs to counteract the effect of the patent cliff," Arnold wrote.
"Despite Alexion's high pricing and single product nature, the company would fit well with Lilly's desire to continue to do small biotech acquisitions, rather than any large, transformative deals."
According to a recent Forbes profile on the company, while the disease Soliris treats is quite uncommon -- it only affects one to five people per million -- Alexion has been searching for expanded uses and has increased the number of patients using the drug.
Along with Lilly, other potential suitors for Alexion include Abott Labs and Bristol-Myers Squibb, Arnold wrote.
Another potential target for Lilly would be Amylin Pharmaceuticals, Lilly's partner in the diabetes drug Byetta, according to the report. That would allow Lilly to ring up 100 percent of sales and profits, rather than splitting them. But it would also carry big risk, since there is no guarantee that the FDA will approve Lilly's application for a once-weekly version of Byetta.
Biotechs that Lilly should not consider, for any number of reasons, include Biogen, Celgene, Endo Pharmaceuticals and Cephalon, Arnold wrote.
In any case, Lilly needs to do something fairly fast, Arnold wrote.
The company is "on the precipice of a steep and prolonged earnings downturn," driven by patent expirations of blockbuster products over the next half-dozen years. Lilly's patent cliff is the worst in the US major pharma group, she added |
