There was more movement in the health care sector Wednesday morning when biotech giant Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) announced that it will acquire Synageva BioPharma Corp. (NASDAQ: GEVA). Through this transaction, Alexion looks to strengthen its global leadership in developing and commercializing therapies for patients with devastating and rare diseases. It is worth mentioning that this deal in total is valued over $8 billion — and it seems easy to wonder if more than 100% buyout premium being paid is just too much.

Note that Alexion has a market cap of roughly $33 billion, which means that it is theoretically giving away about a quarter of its market cap for this deal. 24/7 Wall St. has pointed out a few reasons why Alexion may be grossly overpaying:

• Synageva is expected to have barely $50 million in revenues at the end of 2016, which means revenue growth is more than two years out.
• Synageva has a consensus analyst price target of $111.56.
• The highest price target from analysts was only $125.
• The all-time high for Syngeva’s share price was $122.88
• Looking at Synageva’s pipeline, only one drug candidate is past Phase 3 under review, one is in Phase 1/2 and the remainder are all preclinical.
• Synageva is not very well-known by most biotech investors.

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Back to the deal, Alexion will acquire Synageva in a cash and stock transaction. Shareholders of Synageva will be paid $115 in cash and 0.6581 Alexion shares for each share of Synageva, implying a total per share value of $230.

The transaction has been unanimously approved by both companies’ boards of directors and is valued at approximately $8.4 billion. At the same time, Alexion expects to achieve annual cost synergies starting this year and growing to at least $150 million in 2017. Also the transaction is expected to be accretive to earnings per share (EPS) in 2018.

The addition of Kanuma from Synageva expands Alexion’s premier global metabolic rare disease franchise. Alexion will leverage its proven expertise in rare disease education and diagnostics, and its 50-country operating platform, to maximize the opportunity to serve patients suffering from LAL-D.

David Hallal, CEO of Alexion, commented on the acquisition:

Synageva is an ideal strategic and operational fit for Alexion that aligns with what we know well and do well — providing life-transforming therapies to an increasing number of patients with devastating and rare diseases. With strong ongoing Soliris growth in PNH and aHUS worldwide, and the anticipated 2015 global launches of Strensiq and Kanuma, we will accelerate and diversify our revenue growth. We are excited to create the most robust rare disease pipeline in biotech across a range of therapeutic modalities. Synageva is an outstanding company that shares Alexion’s commitment to serving patients with rare diseases, and together we will create increasing value for our stakeholders.

Felix Baker, Ph.D., chairman of Synageva, answered the question of whether shareholders were getting enough in this deal:

This transaction provides Synageva shareholders with immediate value and the opportunity to participate in Alexion’s long-term growth potential. I am excited to be joining the board of Alexion, a leading, global biotechnology company that is aligned with the mission that Synageva was founded upon — to serve patients who would otherwise be left behind.

There is no doubt that Synageva shareholders are happy with this deal.

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Shares of Alexion closed Monday down 1.6% at $168.55, in a 52-week trading range of $147.81 to $203.30. In premarket trading, shares were down another 1% at $166.75. The stock has a consensus analyst price target of $214.52.

Synageva shares closed Monday down 3.7% at $95.87. However, in premarket trading shares skyrocketed up about 130% to $219.00 hitting a new all-time high. The stock has a 52-week trading range of $60.19 to $122.88.

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