With $4.1 Billion in Its Pocket, Biogen Might Go Shopping

With $4.1 Billion in Its Pocket, Biogen Might Go Shopping
December 7, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Analysts are once again speculating on whether Biogen, Inc. , currently holding $4.1 billion in cash, might be on the market to acquire a biotech company.

Much of this speculation was inspired by its third-quarter financial statements and its so-called “Biogen Bombshell,” when the company indicated it was cutting 11 percent of its staff and slashing several pipeline programs. This, despite quarterly revenues of $2.8 billion, an 11 percent increase over the same quarter in 2014. The company’s non-GAAP diluted earnings per share (EPS) for the third quarter was $4.48, up over 18 percent from the third quarter in 2014.

The company also announced a restructuring program with the intention of cutting operating expenses by $250 million annually. By the end of the third quarter of 2015, the company said it had $7.8 billion in cash, cash equivalents and marketable securities.

Biogen has had a lot of success in the high-risk area of multiple sclerosis (MS) drug development. The company has recently indicated that it is shifting some of its focus to the even riskier, but potentially lucrative, Alzheimer’s market. It has initiated enrollment in two identical Phase III clinical trials for its drug aducanumab, with a total combined 2,700 patients. Analysts project the trial costs to exceed $1 billion. Data is expected through 2020, with completion in 2022.

Analysts have some concerns about this. Its core MS franchise is getting knocked around by competition, pricing pressures, and a decreasing number of untreated patients. In its second-quarter report, it showed softer sales of Tecfidera than expected, as well as its older injectable treatments, Avonex and Tysabri, although they improved in the third quarter. And although the upside of a positive Alzheimer’s drug would be significant, Alzheimer’s drug research is a desert of failed trials, with over 123 drugs abandoned after disappointing results.

Bloomberg surveyed 30-plus investors back in July, and most felt the company should buy a company to bump up its revenue. “Investors think Biogen’s top priority should be to acquire an asset that will have meaningful top-line growth within the next 18 to 36 months,” Asthika Goonewardene, an analyst with Bloomberg Intelligence told BloombergBusiness. “So, not one of those really small biotech companies that will only deliver something very promising five to seven years down the line.”

When Boston Business Journal’s Don Seiffert asked Biogen where all the cash came from, company spokesperson Jason Glashow said it was a reflection of the proceeds of a $6 billion bond offering announced Sept. 11.“Most of that offering,” Seiffert writes, “was earmarked for a $5 billion share buyback program the company had previously announced which the company expects to complete by the end of the year.”

Biogen has indicated an acquisition is possible, although it did not reveal any targets. In its third-quarter conference call, company chief executive officer George Scangos said, “We are constantly looking for interesting opportunities that are consistent with our strategy, that are in our areas of expertise. It is a question of value, of what you get for what you pay, and we have been financially disciplined in the past.”

Although Biogen’s not saying, possible targets cited by investors and analysts have included Boston-based Vertex Pharmaceuticals and New York-based Acorda Therapeutics .

There has also been speculation on if Biogen would be an acquisition target, although it seems less likely than Biogen buying someone. Now that Pfizer Inc. and Allergan ’s marriage has been announced, Pfizer’s off the market, but Roche Holding or Merck & Co. could have the size and interest in acquiring Biogen.

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