Allergan's Brent Saunders Denies Interest in Biogen or Big M&A

Allergan’s Brent Saunders Denies Interest in Biogen or Big M&A August 10, 2016
By Mark Terry, BioSpace.com Breaking News Staff

There has been speculation for some time that Cambridge, Massachusetts-based Biogen is a juicy acquisition target. Most recently, on Aug. 2, there was talk that Allergan or Merck & Co. were probable buyers. However, yesterday Allergan’s chief executive officer, Brent Saunders, surprised investors during the company’s second-quarter financial conference call when he said the company had no interest in Biogen or in other large acquisitions.

Allergan has a history of big mergers, having been created by several of them, including the acquisition by Actavis in 2015. It was well on its way to a mega-merger with Pfizer this year until new Department of Treasury rules regarding tax inversions were enacted.

In addition, one of Allergan’s stop-selling drugs, Namenda IR, for Alzheimer’s disease, lost its patent protection last year. Sales of the drug were only $4.1 million in the most recent quarter, dropping 98.2 percent on a year-over-year basis. Nemenda had $233 million in sales in the second quarter of 2015.

One of Biogen’s most promising assets is aducanumab for Alzheimer’s disease. It’s shown statistically significant improvement in two measures of cognition over placebo in earlier trials, which were promising enough that it was streamlined past Phase II trials and directly into a Phase III trial. Some results are expected later this year, with more definitive data expected in 2017. Most pharmaceutical companies would love to have a strong Alzheimer’s disease program.

So investors and analysts were more than a little surprised and disappointed when asked if the company was looking at big mergers and acquisitions, Saunders said, “We are not looking at and we are not focused on any large transformational M&A.”

He went on to indicate that Allergan was interested in so-called “stepping stone deals,” which would give impetus to its high-performing assets. “It’s not like it’s a new strategy,” Saunders said, “despite our image … in the market. Allergan doesn’t need to do any big M&A. We have a strong pipeline, many of which are late-stage and game-changing potential programs.”

Allergan’s second-quarter finances weren’t all that wonderful, either. It’s quarterly net revenue rose a bit to $3.68 billion from $3.63 billion the same quarter in 2015, but this was significantly less than the average Wall Street estimate of $4.08 billion. The company adjusted its forecast to full-year net revenue of $14.65 billion to $14.90 billion, down from a previous estimate of $17 billion.

But Allergan is sitting on a lot of cash, largely off the sale of its generics business to Israel’s Teva Pharmaceutical , leaving Allergan with an additional $27.6 billion. Max Nisen, writing for Bloomberg, argues that even though Biogen may not be a target, with that kind of money, Allergan’s likely to buy something. “His (Saunders’) disavowal comes as Allergan’s balance sheet gets a $27.6 billion dollar infusion from selling its generics business to Teva. Allergan is sitting on an enormous pile of cash, and it will feel the itch to spend it. It may not spend it on Biogen, but billions of dollars’ worth of smaller deals could be plenty transformative.”

Undoubtedly other companies are eyeing Biogen. And Merck would be a great fit. Merck has a good portfolio and pipeline of multiple sclerosis (MS) products, which is Biogen’s bread-and-butter. Bidnessetc writes, “Biogen’s MS drugs can also offer a complementary fit for Merck’s female-health products, including birth-control device NuvaRing. Moreover, clinical development efforts towards searching for Alzheimer’s cure would also be beneficial for Biogen’s late stage Alzheimer’s candidate. … Biogen would offer exactly what Merck needs at this point—a significant boost to both its ailing and high growth assets.”

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