Mixed reaction to AstraZeneca acquisition

Reactions to AstraZeneca's suprise decision to buy US drugmaker MedImmune for $15.6 billion have been mixed, with many thinking that the price, a 21% premium on its April 20 closing price, was too high (see also page 3).

In a note to investors, analysts at Lehman Brothers stated that the acquisition makes strategic sense at first glance as it will add biologics manufacturing capacity to the Anglo-Swedish drug major, increase its exposuire to biologics and give it a few promising early-stage drug candidates.

However, analysts noted that the logic behind such a high premium, which actually comes to 100% of MedImmune's value under Lehman's PharmaPipelines model, can be justified in term's of AstraZeneca's claim that it can achieve $500.0 million in cost synergies by the end of three years, far greater savings than could normally be expected from a deal of this size. "If investors can get comfortable that this stretch target is achievable, then the acquisition price becomes more realistic, but still expensive," said Lehman Brothers analyst Matthew Weston.