Watch Out Gilead, Investors Feel Vertex May Be Biogen's Good Fit
July 31, 2015
By Alex Keown, BioSpace.com Breaking News Staff
CAMBRIDGE, Mass. – A Bloomberg survey of 30 investors indicates Biogen needs to enter the M&A fray sooner than expected in order to boost revenue, the business site reported this morning.
Asthika Goonewardene, a health-care analyst for Bloomberg Intelligence, said the Boston-based drugmaker should acquire a company “that will have meaningful top-line growth within the next 18 to 36 months.” In other words, don’t bank on possibilities from a promising startup that will not be able to generate revenue for years to come.
While Biogen has little debt, the company has seen some setback in its market value. Over the past few weeks, Biogen’s stock has taken a beating, dropping more than 100 points over a few days. This morning is down from its opening price of $321.92 per share, trading at $314.10 per share.
The selloff was spurred in part by lower than expected sales of Tecfidera. Sales of the drug rose from $700 million in the second quarter of 2014 to $883 million this year. However, analysts were expecting quarterly sales of $909 million instead of $883 million for Tecfidera. In addition to Tecfidera not meeting analysts’ expectations, investors were also disappointed with the latest results of an Alzheimer’s drug treatment that had been quite promising earlier this year. In April, Biogen announced its drug BIIB037, or aducanumab, led to reductions in brain amyloid plaque by as much as 71 percent and was able to reduce cognitive decline. But, Biogen said the 54-week data from the six milligram patients showed a statistically significant decrease of beta amyloid in the brain, but did not show a statistically significant improvement in cognitive decline, although apparently it did show some improvement.
The Bloomberg analysts said Biogen has several potential M&A targets.
1. Vertex Pharmaceuticals – Topping the list was cystic fibrosis drugmaker Vertex Pharmaceuticals. The Boston-based company is poised to become profitable following approval of its newest cystic fibrosis medication Orkambi, a treatment which is widely expected to have a broad impact on the cystic fibrosis market – and a treatment widely expected to sharply boost revenues. The drug is expected to earn $5 billion by 2018. The company is widely thought to be a target of acquisition by California-based Gilead Sciences , which was bolstered by an impressive second quarter financial report that showed earnings of $8.2 billion, nearly $2 billion over the same quarter in 2014. Vertex has a value of about $31 billion.
2. Alexion Pharmaceuticals – In May, Alexion acquired Synageva BioPharma Corp. in an $8.4 billion deal. Alexion’s lead drug Soliris was developed to treat paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS). Soliris has generated more than $2 billion in revenue since its launch in 2007. Alexion has a value of about $42 billion.
3. Neurocrine Biosciences – In June, San Diego-based Neurocrine halted two planned clinical trials that had been evaluating Neurocrine’s CRF antagonist NBI-77860 for the treatment of classic congenital adrenal hyperplasia due to concerns related to preclinical findings in animal studies. Neurocrine is valued at $4.3 billion.
4. Acorda Therapeutics – In July, Acorda Therapeutics was awarded a $1.4 million grant by the Bill and Melinda Gates Foundation to support the development of a formulation and delivery system for a dry powder version of lung surfactant, a drug used to treat neonatal respiratory distress syndrome. The formulation will be based on the company’s proprietary ARCUS technology, and will be produced in collaboration with the Massachusetts Institute of Technology. Acorda has a value of about $1.5 billion.
In addition to the four companies cited by Bloomberg’s analysts, the Boston Business Journal said Biogen could have its eyes set on one of three companies – Isis Pharmaceuticals , BioMarin Pharmaceutical or Alkermes plc .
While Biogen should look to expand its pipeline through acquisition, the company is also rumored to be the target of possible acquisition. There have been rumors that Ireland-based Allergan plc . could be looking at Biogen as a target for that company’s very active M&A activities.