How Wedbush Sees The Alexion–Synageva Deal

In a report published Wednesday, Wedbush analyst David Nierengarten, Ph.D. commented on the merger agreement whereby Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) will acquire Synageva Biorpharma Corp (NASDAQ: GEVA) for $115 per share in cash and 0.6581 Alexion shares – valuing shares of Synageva at $226 per share under the deal.

According to Nierengarten, Synageva was viewed as an acquisition target, but the timing is earlier than he expected. The analyst added that he had expected M&A activity after Kanuma's approval in the U.S. for LAL-D, which was expected to occur on or before the September 8 PDUFA date. As such, Alexion's acquisition marks the company's confidence in Kanuma approval and the revenue potential in LAL-D in addition to the company's other rare disease assets.

Alexion's management team said in a conference call that it expects Kanuma will see revenues in excess of $1 billion – above Nierengarten's peak estimates of $700 million. In fact, the analyst noted that Alexion is likely to price Kanuma in line with Soliris (approximately $500,000 a year) – also above his $390,000 a year estimate. Alexion's management also said it believes LAL-D is underreported, and that the true prevalence is similar to paroxysmal nocturnal hemoglobinuria (PNH).

There are an estimated 4,000 to 6,000 patients in the U.S. with PNH, while the analyst also suggested there are 1,800 patients with LAL-d in the U.S.

Nierengarten continued that he expects the deal to "fall through" with no other potential suitor emerging to challenge the deal.

Shares of Synageva were downgraded to Neutral from Outperform with a price target raised to $226 from a previous $111, representing the value of the cash offered in the deal and closing price of Alexion shares the day before the acquisition was announced.