Hard-hit Biogen needs to act fast, analysts say--or beware its deal-hungry peers

Last week was a less-than-ideal one for Biogen ($BIIB)--and the Massachusetts company may risk becoming deal bait if it doesn't do something about it quickly.

Biogen CEO George Scangos

After a Friday selloff frenzy that whittled $20 billion in market value off the company's stock, some analysts say Biogen could become a takeover target if it doesn't make a significant move to ease investors' fears, The Boston Globe reports.

Luckily for Biogen, it has cash stores of $4.5 billion, which gives it options, the paper notes. For one, Biogen could buy up another drugmaker. It could also use the money for a share repurchase; in May, its board signed off on a program to buy back up to $5 billion in shares, and the company said it expected that to happen within the next 5 years.

But it better do something, Cowen & Co. analyst Eric Schmidt told the Globe. "We are in a world of eat or be eaten," he said. "If they don't redeploy their cash efficiently or properly, there's always a chance that somebody may come in and monetize their assets for them."

The week went south for the Cambridge-based drugmaker Wednesday, when mixed results from a trial of an experimental Alzheimer's candidate sank shares. Things soured further two days later with reports that key moneymaker Tecfidera had fallen short of estimates--and that Biogen had lowered its near-term financial forecasts accordingly.

The way RBC Capital Markets analyst Michael Yee sees it, Biogen's stock is now oversold--potentially improving its buyout candidacy in the eyes of acquisitive drugmakers. "At this level, the company could become vulnerable to being a target," he told the Globe. "If there was an offer, it would be taking advantage of a lower share price."

So who might be in the market? Industry watchers have tossed around AbbVie ($ABBV), which is looking to diversify beyond best-seller Humira, and Allergan ($AGN), which lately has proven itself one of pharma's most active M&A players, as potential buyers. The Irish pharma's Monday agreement to sell off its generics business to Teva ($TEVA) for $40.5 billion boosts its capacity for dealmaking, too, the Globe points out.

Meanwhile, as Biogen mulls its path forward, one of its top priorities for this year's second half is "improving the trajectory of Tecfidera," CEO George Scangos said on a Friday conference call. Advancing its pipeline as quickly as possible is key for the company, too, he noted, and it'll be working to "execute important clinical trials" in order to do just that.

- read the Globe story

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