Biogen hopes to bridge the gap with $7.3bn Reata buy

Biogen’s acquisition of rare neurological disease player Reata provides a much needed near-term sales lift, but at a price.

Chris Viehbacher is continuing to put his stamp on Biogen. Today he announced the $7.3bn acquisition of rare disease company Reata. The $172.50 per share price tag on the deal represents a hefty 63% premium over Reata's 10-day average share price, which could look a little rich if Reata’s pipeline fails to live up to its promise.

Reata’s main attraction is Skyclarys, which was recently approved in Friedreich's ataxia. Analysts are predicting a rapid launch for the product, and peak sales of between $650m and $1.5bn potentially making Skyclarys the much needed near term revenue boost Biogen investors had been looking for.

The takeout of Reata also plays further into a move towards rare diseases which Biogen hinted at in their second quarter earnings call, a strategy that would also provide a measure of futureproofing against any potential impact of the IRA. Today Viehbaher said Biogen’s experience in CNS and immunology made Reata a natural fit.

Steady as she goes

This is the second big piece of news out of Biogen in week, with the company also announcing headcount reductions of 1,000 in its second quarter results on Tuesday and is largely seen as Viehbacher attempting to right the ship at Biogen.

The company is still trying to navigate past the disastrous Aduhelm launch and falling sales from a largely lacklustre pipeline.

While approval for Eisai-partnered Leqembi and expectations around depression treatment Zuranolone have gone someway to raise investor expectations, the group is still facing challenges to its lucrative MS franchise, including potential US biosimilar entries for Tysabri, its current top seller.

As such the Reata acquisition could be seen as decisive action to shore up sales until Biogen’s bigger prospects can come online. But the question will be if the sales gap was big enough to warrant such a large price tag on the solution.

Biogen shares, which had dipped as low as 3% during the day were broadly flat in early afternoon trading indicating investors’ mixed feelings about the deal.

The $7.3bn takeout price only makes sense if Skyclarys can also gain European approval, which is not a given if the EMEA takes a harder stance on Skyclarys’s efficacy data that at one point made the drug’s US approval less than certain.

If some Biogen shares holders are wondering about the numbers, Reata shareholders will be celebrating. Pressure had been on Reata following Skyclarys’ approval after the product had experienced initial launch problems due to manufacturing impurities and in May the group announced the discontinuation of its other pipeline product, bardoxolone, after disappointing data from the Japanese Ayama trial.

As such bagging the third biggest deal of the year could be seen as quite the achievement.

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