Who Can Gobble Up Biogen, or Who Can Biogen Buy

Who Can Gobble Up Biogen, or Who Can Biogen Buy
November 16, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Cambridge, Mass.-based Biogen, Inc. ’s recent shift in corporate strategy to focus more on the risky Alzheimer’s market has analysts wondering if the company could become an acquisition target for a larger drug company, or if Biogen has its eyes on going shopping itself.

In what has been called the “Biogen Bombshell,” the company reported in October that it was slashing 11 percent of its staff and cutting several pipeline programs. These seemingly dramatic changes came despite third-quarter financial reporting that indicated an 11 percent increase in revenue in that quarter, $2.8 billion.

Biogen’s focus has been in high-risk areas, particular multiple sclerosis (MS), where it has really been quite successful. But the company is cutting a Phase III trial of MS drug Tecfidera for secondary progressive multiple sclerosis (SPMS), and sales of Tecfidera have been affected by two cases of a very rare side effect called progressive multifocal leukoencephalopathy (PML) that resulted in death.

In recent reports, the company appears to be shifting at least some of its focus to the even riskier, but potentially lucrative, Alzheimer’s market. The company has initiated enrollment in two identical Phase III trials for its drug aducanumab, with a total combined 2,700 patients. Analysts project the trial costs to exceed $1 billion and data is expected through 2020, with the studies being completed in 2022.

Which is part of what worries analysts. Not only does Alzheimer’s drug research have a significant history of failure, with reportedly over 123 drugs having failed clinical trials, but the timelines for much of Biogen’s plans appear rather long.

If aducanumab turns out to be wildly successful, a big “if,” it wouldn’t hit the market until 2019 or 2020. The company is also working on another big MS drug candidate, anti-LINGO-1. This drug appears to be able to actually reverse the nerve damage caused by MS. If that were successful, it could potentially bring in $10 billion a year in peak sales, but it probably wouldn’t hit the market until 2021.

And while all the research and development is going on, the company’s core MS franchise is getting battered by competition, pricing pressures, and a decreasing number of untreated patients. In the company’s second-quarter financials, it reported softer-than-expected sales of Tecfidera, as well as its older injectable treatments, Avonex and Tysabri.

On the other hand, third-quarter sales improved. It’s interferon-based drugs, Avonex and Plegridy, improved, although Tysabri declined. Tysabri will get hammered as Roche launches Ocrelizumab. The company recently reported excellent results, even “ground-breaking,” in three new phase III trials for the drug in MS. If the drug lives up to its promise, it’s likely to dominate the MS treatment market.

So with a company that’s playing a long game in a risky market while its core products are losing market share, analysts are speculating on ways the company will appease investors in the run-up to hopefully successful product launches down the road.

Being acquired is a possibility. Hannah Ishmael, writing for BidnessEtc., points out that Pfizer Inc. , which might have been interested in Biogen, is currently in talks regarding an acquisition of Allergan Plc . Ishmael suggests that Roche Holding or Merck & Co. might be more likely to have an eye on Biogen. “Both companies,” she says, “have their own ongoing trials in Alzheimer’s underway and have enough cash-to-debt flexibility to strike a Biogen-sized acquisition.”

However, Ishmael believes that Biogen is unlikely to sell and that the company’s chief executive officer, George Scangos, appears confident in his strategy. He also has a history of successfully shaking up companies and making successful bets on long shots.

A better bet, then, is that Biogen, in the short-term, may acquire a company or two in order to bolster its revenues and make shareholders happy while working toward big product launches in 2019 and 2020 or so. If so, who?

Ishmael suggests Acorda Therapeutics might be an attractive target. The company focuses on neurological research, markets an MS drug, Ampyra, and has a clinical pipeline for Parkinson’s, epilepsy, spinal cord injury, heart failure and MS. It also is working on a product similar to LINGO-1. Certainly the research synergies make sense. Michael Yee, an analyst with RBC Capital Markets, has said that Ampyra sales for MS alone could be worth $35 to $44 per share.

Acorda is currently trading at $36.84 per share. It’s had its ups and downs over the last year. Shares traded for $35.83 on Jan. 26, 2015, dropped to $29.14 on May 5, rose to $35.49 on July 15, and dropped to $25.78 on Sept. 29.

Biogen is currently trading for $283.79 per share. Its high for the year was $475.98 on Mar. 20, 2015, and its low was $256.04 on Oct. 13.

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