Who Might or Might Not Buy Regeneron, And Why
January 20, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Regeneron Pharmaceuticals is often tossed around as a potential acquisition target, although those rumors had slowed over the last six months or so. But apparently they have resurfaced. Ed Wijaranakula, writing for Seeking Alpha, takes a look.
Some of the rumors are simply because some of the bigger companies, like Pfizer , Novartis AG , Gilead Sciences and Sanofi seem to have both cash and an interest in acquisitions. David Risinger, an analyst with Morgan Stanley, wrote recently, “While larger deals would be more challenging to consummate, they would provide greater amounts of revenue and growth.”
Nonetheless, many larger pharma companies have expressed interest in smaller bolt-on deals than any type of megamerger.
Regeneron’s has been battered since November’s high of $452.96 over competition concerns for its eye drug Eylea (Aflilbercept) for wet age-related macular degeneration, and legal battles with Amgen over patents for Repatha (evolocumab) for cholesterol. Shares are currently trading for $365.62.
Wijaranakula writes, “In our view, a takeover would pose a significant challenge as Regeneron and Sanofi have been collaborating since 2007. Sanofi also owns a large stake in Regeneron’s common stock, and has nominated an independent director to the Regeneron Board of Directors. Last year, both companies entered into a major development of antibodies and bispecific antibodies for immune-oncology. REGN2810, an antibody to programmed cell death protein 1 (PD-1), has now entered a pivotal clinical study for the treatment of advanced cutaneous squamous cell carcinoma.”
Allergan is probably not a likely buyer either, largely because the company appears to be focused on buying back shares and smaller acquisitions, which the company’s chief executive officer, Brent Saunders, calls “stepping stones deals.”
Pfizer acquired Medivation for $14 billion in August, then picked up AstraZeneca (AZN)’s antibiotics portfolio for $1.5 billion. Wijaranakula writes, “In our view, Pfizer may have already given up on a large M&A deal like Regeneron, after its failed attempts with Allergan in April 2016, and AstraZeneca in May 2014. Instead, Pfizer could simply want to do a series of bolt-on transactions.”
Which brings up Gilead. Investors have consistently urged the company to buy something to bolster its revenue. Several analysts have pointed to the company slowing its share buyback program as an indication Gilead might be freeing up cash for an acquisition. The company’s chief executive officer, John Milligan, speaking at the Morgan Stanley Global Healthcare Conference in September 2016, said that Gilead wouldn’t rule out a large deal, even if the company’s preference was smaller deals.
Wijaranakula writes, “In our view, Gilead might not be interested in Regeneron at all. Gilead CEO Milligan told Meg Tirrell during an interview on CNBC last week that, ‘we are looking heavily at assets that can combine with or be complementary to things that we own.’ While Gilead is looking for deals, its stock continues to slide to a level not seen since May 2014.”
The conclusion is that, although there are reasons to acquire Regeneron, its relationship with Sanofi makes it a tricky acquisition and most bigger companies seem more interested in acquiring smaller companies.