Why SoCal's Acadia May Be a Perfect Takeover Target for Biogen
April 4, 2016
By Mark Terry, BioSpace.com Breaking News Staff
When analysts aren’t speculating on who might buy Cambridge, Mass.-based Biogen , they’re speculating on who Biogen might buy. A current look at the tea leaves has San Diego, Calif.-based Acadia Pharmaceuticals as a potential hot property.
On Mar. 29, Acadia announced that the U.S. Food and Drug Administration (FDA)’s Psychopharmacologic Drugs Advisory Committee (PDAC) voted 12 to 2 recommending its drug, Nuplazid (pimavansrin), to treat Parkinson’s psychosis. The PDUFA date is May 1, so a final decision is likely expected before then.
“We are very encouraged by the Committee’s positive vote today and look forward to working with the FDA as it completes its review of Nuplazid,” said Steve Davis, Acadia’s president and chief executive officer. “If approved by the FDA, Nuplazid would be the first drug indicated to treat psychosis associated with Parkinson’s disease.”
That was good news for Acadia, which, as Brian Feroldi of The Motley Fool, pointed out, was something of an all-or-nothing decision for the company, which doesn’t have much else in its pipeline. “Acadia Pharmaceuticals’ stock isn’t for the faint of heart—nearly all of its market value is riding on the success of Nuplazid. If the FDA gives the drug the greenlight, it’s likely Acadia’s stock will soar, but if the FDA decides to reject the drug, the company’s stock will be crushed.” Analysts have projected Nuplazid could hit $3 billion in peak sales.
Hadia Taqi, writing for BidnessEtc, said, “Nonetheless, the ongoing weakness in the biotech sector and Acadia’s pressured share price makes the company a particularly attractive acquisition target for larger drugmakers. In a February research report, Bank of America Merrill Lynch started coverage on Acadia with a Buy and suggested a 12-month price target of $40 for its stock, a nearly 54 percent upside over yesterday’s close and a 100 percent upside over the February 5 share price.”
Acadia is currently trading for $30.61.
So why Biogen?
There’s a fair amount of overlap. Biogen, which dominates the multiple sclerosis (MS) market, has three Alzheimer’s drugs in its pipeline, aducanumab, BAN2401 and E2609. It also has a drug (Nusinersen) being evaluated for spinal muscular atrophy, and a Parkinison’s disease drug (BIIB054) in trials. BIIB054 was acquired from Neurimmune and is in early-stage trials.
They’re all pretty risky drugs—everything in the central nervous system arena is—although the market for aducanumab is well over a billion dollars. In a February research report, Merrill Lynch wrote, “We estimate aducanumab is potentially worth $42/share on 45 percent probability of success, and $98/share if aducanumab is ultimately approved by FDA as a treatment for Alzheimer’s disease.”
But Taqi points out that even if Biogen’s drugs all line up and get approved, however unlikely, they wouldn’t hit the market for about five years. “Acadia’s Parkinson’s and Alzheimer’s research along with Nuplazid’s commercial success can give significant boost to Biogen’s research and development and top-line.” And investors are urging Biogen to acquire something to bolster its bottom line as its MS franchise faces competition and pricing pressures.
“Investors think Biogen’s top priority should be to acquire an asset that will have meaningful top-line growth within the next 17 to 36 months,” wrote BI analyst Asthika Goonewardene. “So, not one of those really small biotech companies that will only deliver something very promising five to seven years down the line.”
Acadia has a market cap of about $3.5 billion, so it is well within range of Biogen’s affordability and its likely approval of a CNS-related drug soon would dovetail nicely with Biogen’s market needs.