Add up all the money biotechs raised from initial public offerings since 2015. The sum still wouldn't surpass how much value Biogen lost Thursday after revealing its most advanced drug for Alzheimer's disease wasn't likely to succeed in late-stage clinical trials.
Setbacks happen quite often in drug development. Yet the failure of aducanumab, a monoclonal antibody co-developed with Japan's Eisai, stung Biogen particularly hard. Though the company is working on at least two dozen other experimental therapies, Wall Street had attributed most of the value in its high-risk neuroscience pipeline to aducanumab.
With its crown jewel essentially shelved, Biogen will feel greater pressure to build out its pipeline through major M&A. There's just one problem: Biogen doesn't do big-ticket deals.
The company has been hesitant to say it only does deals of a certain size, but the fact remains that Biogen has historically opted for smaller, more conservative acquisitions and licensures that give it access to early-stage assets. Of the five takeovers Biogen has done since 2006, the most expensive was this month's purchase of Nightstar Therapeutics for $800 million.
"They did a conference call on it," Mizuho Securities analyst Salim Syed noted to BioPharma Dive. "I think anybody else would have described it as a tuck-in ... but that's what this company does."
Flashy deals not so easy
Changing up that long-held strategy may be challenging. And even if Biogen does develop a bigger appetite for M&A, pursuing larger deals is easier said than done.
By Syed's estimates, Biogen holds about $4 billion in cash and can raise another $12 billion in debt, giving it enough purchasing power to buy two small- to mid-cap biotechs. In a March 21 note, the analyst wrote that seven names have frequently come up when Biogen investors are asked about potential M&A: Acadia Pharmaceuticals, Alder Biopharmaceuticals, Biohaven Pharmaceutical, Neurocrine Biosciences, Orchard Therapeutics, Sage Therapeutics and Sarepta Therapeutics.
Given Biogen's needs, Syed expects whatever target the company goes after will have at least one therapy in advanced testing. What's attractive to Biogen, however, is likely attractive to other suitors too.
"People know they've got to buy something, and anything that's late-stagey enough could have other potential acquirers," Syed said.
Notably, Biogen isn't the only drugmaker facing headwinds. Many say they're spending more on R&D but getting less in return.
That trend, combined with increased pricing pressure in the U.S., is pushing companies to search for innovation externally. In the increasingly attractive field of gene therapy, for instance, Avexis, Nightstar and Spark Therapeutics all received takeover bids from more than one party.
Though Biogen won out on Nightstar, the deal didn't provide any in-house manufacturing capabilities or a gene therapy platform with a wide therapeutic focus. Syed therefore expects gene therapy transactions will remain an M&A priority for Biogen. Investors have increasingly brought up Orchard and its diverse pipeline of gene therapies as a possible target for Biogen, according to Mizuho.
Biogen told BioPharma Dive in an emailed statement that, outside of the ophthalmology assets acquired via Nightstar, it sees "potential for gene therapy across a number of other areas within neuroscience."
Orchard declined a BioPharma Dive request for comment.
"There's a lot of things working against Biogen on the M&A front right now."
Meanwhile, Alethia Young of Cantor Fitzgerald estimates that Biogen has a little more purchasing power and could conduct a $20 billion acquisition if it wanted.
As for the target, Young told BioPharma Dive that "all things neuro" — from migraine and depression to Tourette's syndrome and Duchenne muscular dystrophy — would be on the radar, especially if the acquisition leverages Biogen's neuroscience experience. Young said Sage, Sarepta and Ionis Pharmaceuticals, a developer of RNA-focused therapeutics that already collaborates with Biogen on several neurological treatments, have come up as companies that could see deal interest from the big biotech.
Sage recently secured the first-ever Food and Drug Administration thumbs up for a postpartum depression medicine. While Wall Street sees limited commercial prospects for that treatment, analysts predict another postpartum depression drug in Sage's pipeline could fetch peak sales of around $4 billion if it comes to market.
Sarepta also snagged a first-of-its kind approval with Exondys 51 (eteplirsen), an RNA therapy for Duchenne muscular dystrophy. The therapy has done well commercially despite criticism over its questionable efficacy. Sarepta is looking at other ways to treat the rare neuromuscular disorder, and recently posted positive data from a small group of patients who received one of its experimental gene therapies.
Sarepta declined a BioPharma Dive request for comment. A Sage representative didn't respond to a request for comment.
All this chatter comes with the assumption Biogen is open to becoming a more active dealmaker. Some aren't convinced that will be the case.
"Biogen's path forward is very unclear, and despite speculation about M&A we find it unlikely that the company’s management team and board will be able to pivot quickly to M&A, having only recently learned of this major failure," SVB Leerink analyst Geoffrey Porges wrote in a March 22 investor note.
To buy, or to be bought
Shares of Biogen stock opened at $225 apiece Friday, nearly $100 lower than they were trading two days prior.
The cheaper share price is fueling the idea that Biogen, which itself is no stranger to takeover speculation, may become more of a target for a large biopharma.
"It's kind of like the road that cuts both ways for them," Young said. "I could see them doing deals and bolstering a pipeline, continuing to be independent and doing well from there. Or I could see them being acquired."
There's a very shallow pool of companies that have a neuroscience interest and could actually afford Biogen, which still maintains a market cap well above $40 billion. Novartis and Roche each have blockbuster multiple sclerosis franchises and recorded more than $10 billion in cash, cash equivalents and marketable securities at the end of 2018.
Allergan, though not as large, has identified central nervous system disorders as one of its four R&D areas of focus.
But perhaps a bigger deterrent than the price tag is Biogen's pipeline and portfolio.
Many of its candidates go after hard-to-treat diseases like stroke, lupus and ALS. Wall Street hasn't placed much value on such a risky pipeline — and suitors might not as well. On the product side, its multiple sclerosis drug Tecfidera (dimethyl fumarate) and spinal muscular atrophy therapy Spinraza (nusinersen) are facing competitive threats.
Even in cases like Bristol-Myers Squibb's attempted acquisition of Celgene, where there is clear complementation between the drugmakers' businesses, investors have been wary of mega-deals when the target is battling headwinds.
"Biogen is, at this point, Celgene without a pipeline," Mizuho's Syed said.