Biogen pick for CEO seen to refute chances for a buyout, but never say never, analysts say

Biogen CEO Michel Vounatsos

Biogen Tuesday approved the planned spinoff to investors of its hemophilia business—which will be known as Bioverativ—but it may be the only kind of divestment action investors are likely to see from the company any time soon. Analysts Tuesday were tamping down the expectation for a buyout of the big biotech as they mulled over what it meant for Biogen to let its top sales guy start calling the shots. Still, as several indicated, there is always hope.

The Cambridge, Massachusetts, biotech Monday named Michel Vounatsos, currently chief commercial officer, as to replace the departing George Scangos who has held the top spot since 2010. In a call Tuesday, Vounatsos, in a heavy French accent, ticked off some goals, like getting the company’s candidate for spinal muscular atrophy approved and successfully launched, and to turn around and continue to grow its core multiple sclerosis business. But the topic of whether Biogen might be a buyout candidate never came up.

Still, that didn’t stop analysts  from addressing it with investors, for which it continues to be top of mind. 

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In a note to investors, Leerink analyst Geoffrey Porges, said that an $80 billion plus transaction, which is what it would take to buy Biogen, “is always a low probability, and remains so in our view.” Nevertheless, Porges said, with a ”scarcity of assets in the industry, it could happen.

While some analysts suggested Vounatsos was an uninspiring choice to lead the company, Porges also thought Vounatsos credentials provide investors with some hope of financial improvements at the company in the near term.

Jefferies analysts, on the other hand, acknowledged that the promotion of an internal candidate might give some investors more hope for a sale of the company than if Biogen had brought in an outside candidate to “overhaul” the organization. Still, they told clients, it was there sense that Biogen intends to pursue an independent path and “this announcement reduces the near-term” chance of a buyout.

But the Jefferies note also pointed out there are investors who still believed in the chance for a deal. “Our sense from speaking with investors is that there was still a reasonable expectation the company could be acquired very near term,” the wrote.

Evercore ISI analyst John Scotti did wonder if instead of a buyout, the new CEO might be suggesting more restructuring at the company when he spoke about an upcoming strategic review. Vounatsos on the call mentioned that his long-term objectives include striving to become a “highly efficient organization” with a “disciplined focus on execution.”

Of course, Biogen last year took a pretty good whack at costs, cutting more than 800 jobs in an effort to squeeze out about $250 million a year in operating expenses to reinvest in R&D.

R&D spending is something many Biogen watchers think the company sorely needs to do. It does have under FDA review, Spinraza, for the rare but devastating fatal childhood disease spinal muscular atrophy (SMA). Vounatsos said its approval and successful launch is one of several short-term goals for the company. He also said Biogen's biggest challenge and opportunity is its development program for Alzheimer’s disease. Still that is a long way off and given the failures in that field so far, remains a long shot. The new CEO said Biogen will look at opportunities to buy more near-term assets but kept his remarks vague about the possibilities.

Until then, the company will have to manage its other areas, particularly its MS program, anchored by Tecfidera. It was softening sales in that area last year that set the stage for Vounatsos' arrival and and now promotion to CEO. The sales stall also hurt Biogen's stock price and so escalated talk of a buyout by Allergan, Merck or someone else.

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