- Biogen stock jumped by over 9% in late trading Tuesday, spurred by reported takeover interest from Merck & Co. and Allergan. Shares rose to $330.11, a roughly $6 billion increase in market capitalization for the Cambridge, MA-based biotech.
- According to The Wall Street Journal, Merck and Allergan have approached Biogen about a potential buyout, although conversations were apparently preliminary and informal. CNBC subsequently reported Allergan "had no interest in a Biogen deal," citing sources and trading Wednesday morning reversed much of yesterday's gains.
- While Biogen has a leading position in the market for multiple sclerosis (MS) and recently notched a 12% year-over-year pop in second quarter sales, it is also a risky takeover bet. Sales growth for its top-earning MS treatment Tecfidera has leveled off and its pipeline is led by a number of high-risk, high-reward candidates.
The takeover rumors for Biogen point to broader interest in biotech M&A as a sustained sector-wide slump over the past year has brought values down for many companies. While Biogen's stock has climbed in recent months, its shares continue to trade below the highs seen last summer.
In some ways, Biogen has taken steps which would appear to tie itself up for a potential acquisition. Biogen CEO George Scangos, who presided over a near doubling in revenue over his six-year tenure but focused the company on riskier areas, announced he would step down earlier this month as soon as a successor is found.
In conjunction with the CEO's abrupt departure announcement, Biogen also revealed plans to spin off its hemophilia business into a separate company, going back to its roots to focus on multiple sclerosis and other neurological diseases. Other signs of turmoil – the company announced last fall an 11% cut to its workforce and terminated a number of pipeline programs to fund marketing for Tecfidera and development for pipeline products.
Beyond that, Biogen presents a number of notable risks, which may be tough to swallow for a potential acquirer—especially at a roughly $70 billion valuation.
Tecfidera had been growing rapidly following its launch in 2013 until a patient death from a rare type of brain infection in 2014 led to a black box warning, discontinuations and lower sales.
Revenue from Tecfidera has since bounced back and hit $987 million in the second quarter, mostly due to higher prices. But Biogen is now seeing only single-digit growth rates rather than skyrocketing sales it had seen before.
Consensus sales forecasts put 2022 revenue at $4.7 billion, according to EP Vantage—much lower than previous bullish estimates which ranged from $6 billion to as much as $9 billion. And chief financial officer Paul Clancy recently indicated Biogen halted its direct-to-consumer marketing campaign for the drug, acknowledging it failed to increase prescriptions.
Biogen's pipeline, on the other hand, is led by its Alzheimer's drug candidate aducanumab, which if successful would be a major win for the company. But Alzheimer's development is notoriously difficult, with numerous Phase 3 failures.
Currently in Phase 3 itself, aducanumab is anything but a sure bet. It targets beta-amyloid plaque development in the brain, a heavily-researched but to date unproven approach to treating the disease.
Allergan, if it actually is interested, just got a pile of money from selling its generics portfolio to Teva, receiving $33.4 billion in cash and another $5.5 billion in Teva stock. However, $10 billion of that is already earmarked for a share repurchase program and Allergan CEO Brent Saunders has indicated a preference for "stepping-stone" acquisitions.
Merck has the heft for a major acquisition but Biogen's portfolio may not line up with its focus on cancer.
As of mid-morning on Wednesday, belief in the takeover rumors seemed to be waning, with Biogen stock reversing a good chunk of its Tuesday afternoon gains. The reported interest serves as a good prism for evaluating the company's potential as it transitions to new leadership.