Morgan Stanley: Market's Reaction To Linger For Alexion Pharmaceuticals

shares are likely to suffer lingering ill effects from its $8.4 billion plan to acquire

, an analyst said Thursday. Even with a recent recovery, Alexion remains off more than 10 percent since the cash-and-stock deal got announced early Wednesday: The stock traded recently at $164.44, up $6.43. A long pay-back period for the acquisition suggests that the market's "knee-jerk reaction will linger," Morgan Stanley's Matthew Harrison said. "Investors will need to see a significant ramp-up" in sales of Synageva's lead product Kanuma before warming up on the deal, according to Harrison, who maintained a Neutral rating on Alexion. Alexion expects the acquisition will boost its adjusted earnings per share by 2018, and result in annual cost synergies of at least $150 million by 2017. But Harrison said the stock component of the deal will make earnings accretion by 2018 "tough" for Alexion to achieve, even taking into account the full $1 billion added buyback authorization Alexion announced Wednesday. Harrison estimates that Alexion will issue a net of 20 million shares in the acquisition along with taking on the $3.5 billion in debt financing it announced. The newly issued shares will create a 9 percent "dilution headwind" on their own, Harrison estimated. "This will take time to play out," Harrison said, adding that positive aspects include revenue diversification and a broader product pipeline for Alexion.