How Biogen outbid a rival 'large-cap' pharma to claim Reata for $7.3B

Biogen’s $7.3 billion buyout of Skyclarys-maker Reata Pharmaceuticals surprised some industry watchers last month. But it turns out Biogen wasn’t the only drugmaker jockeying for the Texas-based rare disease outfit, a new securities filing shows.

Back in May, before Biogen entered the picture, a separate “large-cap pharmaceutical company," identified only as “Party A," set up an introductory meeting with Manmeet Soni, Reata’s president, COO and CFO, to discuss collaboration opportunities in Europe, the filing says.

Two days after that, a senior executive from Party A contacted Warren Huff, chairman and CEO of Reata, to request an intro call to further discuss opportunities for the businesses to team up.

Ultimately, a bidding war ensued in which Biogen came out on top, anteing up about $7.3 billion in cash to acquire Reata, whose fortunes had been boosted following its first commercial approval for the Friedreich’s ataxia drug Skyclarys in February.

Near the start of the dealmaking process, in early June, Reata’s board held a meeting to determine that third-party players could pursue an acquisition of the company, according to the filing. During the meeting, board members “generally agreed” that Biogen and Party A were the most likely candidates to complete an acquisition of Reata “at a compelling valuation."

Throughout the month of June, things heated up. Reata and Party A entered a confidentiality agreement on June 16, and about a week later Biogen's CEO Christopher Viehbacher contacted Reata's executives to request an introductory call, which was scheduled for July 10.

Three days before that meeting, Party A made its initial offer, floating a bid to buy Reata at $140 per share in cash.

That offer, however, “substantially undervalued Reata compared to its value as a standalone company,” Reata determined. Reata’s board instructed senior management to reject the initial offer from Party A.

Several days later, Biogen met with Reata and requested a confidentiality agreement as the parties explored “strategic opportunities.”

That same day, Party A raised its offer to $147 per Reata share. The board again determined that this offer “substantially undervalued” Reata.

On July 14, Reata’s Huff and Soni met with Biogen’s CEO Viehbacher and the company’s head of corporate development Adam Keeney, after which Biogen proposed to buy the company for $150 per share.

Party A ultimately raised its offer to $155 per share, which Biogen countered with a $172.5 per share bid.

In the end, Reata’s board determined that Biogen’s revised offer was within the “zip code” they would consider for M&A, but still wanted the suitor to make certain amendments to its merger agreement.

On July 27, both Biogen and Party A made their final offers, alongside revised mark-ups of their draft merger agreements. Biogen settled on its $172.50 per share bid, while Party A offered $172 per share of Reata.

For Biogen, the deal gets the company’s hands on Skyclarys, which carries a sales potential of $1.5 billion in 2030, according to analysts.

Late last month, reflecting on the buyout, Biogen chief Viehbacher called his company “the natural owner for Skyclarys.”

When the deal is done, Biogen will be able to synergize the Skyclarys commercialization with two of its other products—Spinraza for spinal muscular atrophy (SMA) and newly approved Qalsody for amyotrophic lateral sclerosis (ALS), he said.

Viehbacher is a recent addition at Biogen, succeeding previous CEO Michel Vounatsos, who led the company since 2017. Given Biogen’s struggles in recent years—not least of which surround the failed Alzheimer’s disease drug Aduhelm—it was widely speculated that Viehbacher was tapped for his veteran dealmaking prowess.

In striking fast for Reata, the CEO has now made his first major move in steering Biogen's future.