Alexion Pharmaceuticals, Inc. (ALXN): Is Big Pharma Crazy for Chasing This Deal?

The bottom line is that unless all of Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)’s clinical products end up successful, there is little to no value in Roche trying to acquire the company. Strategically, it doesn’t make sense.

Roche is not an orphan company; it is the world’s largest developer and manufacturer of vaccines, mostly in oncology. Roche has the world’s best-selling breast cancer drug, Herceptin, which reported $7 billion in sales last year. Hence, with Herceptin contributing nearly 15% of its Roche’s sales, the company’s strategic plan is based around marketing cancer products.

When all is said and done, I don’t see why Roche would want to pay $25 billion, 11% of its market capitalization, for a drug that has current sales of just $1.23 billion, 2.4% of Roche’s annual revenue. The numbers just don’t add up, and the strategic synergies do not align. Therefore, if Roche is serious, and this acquisition materializes, then yes, I’d say that Roche is in fact crazy for chasing this deal.

Sherrie Stone has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Sherrie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Is Big Pharma Crazy for Chasing This Deal? originally appeared on Fool.com and is written by Sherrie Stone.

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