Are Shareholders Getting Enough in the Achillion Acquisition?

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Achillion Pharmaceuticals Inc. (NASDAQ: ACHN) shares skyrocketed on Wednesday morning after an announcement that the firm would be acquired by Alexion Pharmaceuticals Inc. (NASDAQ: ALXN). While shares are up sharply on this move, they are still down significantly from where they were only three years ago. This begs the question: Are Achillion shareholders getting enough out of this deal?

The initial consideration of approximately $930 million, or $6.30 per share of Achillion common stock, will be funded with cash on hand. As part of the acquisition, Alexion will also be acquiring the cash currently on Achillion’s balance sheet. As of September 30, 2019, this was approximately $230 million; the actual amount will be determined as of the transaction close.

The transaction includes the potential for additional consideration in the form of non-tradeable contingent value rights (CVRs), which will be paid to Achillion shareholders if certain clinical and regulatory milestones are achieved within specified periods. These include $1.00 per share for the U.S. FDA approval of danicopan and $1.00 per share for ACH-5228 Phase 3 initiation.

Note that Alexion’s acquisition of Achillion is subject to the approval of Achillion shareholders and satisfaction of customary closing conditions and approval from relevant regulatory agencies, including clearance under the Hart-Scott Rodino Antitrust Improvements Act. Pending these approvals, the transaction is expected to close in the first half of 2020.

At the price of $6.30, the transaction implies premiums of 52.9% and 101.9%, from the 50-day and 200-day moving averages of $4.12 and $3.12, respectively. As mentioned before, just three years ago this was an $8 stock, but since then it has been more than halved.

Shares of Achillion traded up 70% early Wednesday, at $6.35, in a 52-week range of $1.29 to $5.03. The consensus price target is $8.00.

Alexion traded flat at $104.79. It has a 52-week range of $92.56 to $141.86 and a consensus price target of $155.42.


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