Biogen, besieged by controversy and under pressure from investors, will sell its stake in a South Korean drugmaker to partner Samsung Biologics for as much as $2.3 billion, the company announced late Thursday.
The drugmaker, called Samsung Bioepis, was set up by Biogen and Samsung Biologics as a joint venture in 2012 to develop and manufacture biosimilars, copycat versions of high-priced biologic drugs.
Biogen currently holds a roughly 50% stake in Samsung Bioepis and sells in Europe biosimilar versions of the lucrative drugs Enbrel, Humira and Remicade that the joint venture developed. Under the sale agreement, Biogen will receive $1 billion at deal closing, another $1.25 billion over the following two years and up to $50 million in further conditional payments.
According to analysts, the cash influx bolsters expectations that Biogen will seek to acquire another drug company in the near future, particularly as sales of its top products decline and adoption of Aduhelm, its controversial new drug for Alzheimer's disease, remains low.
"Biogen has a declining base business, uncertainty with Alzheimer's and I don't think there's much of a pipeline that we can point to with any sort of confidence to say, 'This is the next thing investors should focus on,'" said Salim Syed, an analyst at Mizuho Securities, in an interview. "So you have to go outside of the company."
Shares in Aurinia Pharmaceuticals, a biotech developer of a lupus drug, rose Friday on a report suggesting Biogen may be considering acquiring the company. STAT News previously reported that Aurinia, along with Biohaven Pharmaceuticals and Amylyx Pharmaceuticals, were on a list of acquisition targets presented to Biogen by investment bank Goldman Sachs.
Syed estimates that the $1 billion in upfront cash Biogen will receive from the sale put the company's "acquisition capacity" in the range of $10 billion to $11 billion, assuming Biogen takes on additional debt. Michael Yee, an analyst at Jefferies, came up with a similar figure in a Jan. 27 note to clients.
"They don't have a lot of purchasing power," Syed added. Biogen has historically focused its research on areas related to the brain and central nervous system. But, "you look at that landscape, it's limited. And if you look at what you need to put on in terms of premium, it gets limited more. So getting that extra dollar in the door helps."
Brian Skorney, an analyst at Baird, agrees that Biogen will be challenged to do a substantial acquisition. "The current structure of Biogen and the controversy makes it very hard to do a board-level acquisition," he said in an interview.
"Could they do a $5 billion acquisition that doesn't require board approval? Probably. I wouldn't be surprised to see them put some of the money to work," Skorney added.
Expectations for Biogen to acquire a drugmaker have steadily risen since Aduhelm's hotly contested Food and Drug Administration approval last June. The drug's launch has floundered, with sales through Sept. 30 totaling just $300,000 as a number of high-profile medical centers refused to administer the drug and insurers balked at its price tag.
Earlier this month, Medicare proposed to strictly limit coverage for Aduhelm to only people with Alzheimer's who are participating in clinical trials, a decision Biogen has said it will seek to reverse.
The entry in the U.S. of generic competitors to Biogen's top-selling multiple sclerosis treatment Tecfidera, meanwhile, has dragged heavily on the company's revenue. In December, Biogen said it would cut costs by $500 million.
Biogen's fortunes have tumbled so far that it is now the target of acquisition rumors, most notably a Korean business news report in December that Samsung Biologics was seeking to buy all of Biogen for more than $42 billion. Samsung Biologics quickly denied the report, but this week's announcement could be related.
"In light of that sort of leak or rumor, a lot of us felt like, 'Wow, probably someone somewhere knows that Biogen and Samsung are talking to each other, but it's probably not about an outright acquisition of Biogen,'" said Skorney.
With the planned sale to Samsung Biologics, Biogen will earn roughly three times the $700 million or so it had invested in Samsung Bioepis since 2012, the bulk of which came in 2018 when Biogen upped its stake to 49.9%.
Biogen will continue to sell the three biosimilars Benepali, Imraldi and Flixabi in Europe, profits on which it splits with Samsung Bioepis. A separate agreement between the two companies gave Biogen commercial rights to a biosimilar version of the eye treatment Lucentis that was recently approved in the U.S., as well as another still in development.
Revenue from biosimilar sales makes up a small portion of Biogen's total revenue, accounting for about 9% of the $6.7 billion the company reported for the first nine months of 2021. (Biogen will report fourth quarter and full year earnings next week.)
Since the marketing agreement between the companies remains in place, the sale will not affect Biogen's biosimilar revenue. The exit from its half ownership stake in Samsung Bioepis will, however, lower the percentage of profits Biogen realizes to 50%, from 75% previously.
Shares in Biogen rose 1% Friday morning, tracking roughly with the broader market.