Biogen is showing CEO Michel Vountasos to the door in the aftermath of its Aduhelm debacle. As the company searches for a new leader, one skill set stands out to investors as the most-coveted piece of expertise they’re looking for in a new captain.
Nearly 40% of Biogen investors said they want a CEO with a track record of successful business development, either through in-licensing deals or acquisitions, an RBC Capital Markets survey shows. By comparison, R&D expertise and cost-cutting experience were less valued.
The results reflect a perception of low expected returns from Biogen’s existing pipeline and stress the importance of external dealmaking in driving the company’s value and renewing confidence in the biotech’s business, RBC analysts said in a Wednesday note.
The good news, as SVB Securities analysts observed Tuesday, is that Biogen’s cash flow remains strong with “minimal” debt on its hands. That means the company has the bandwidth to strike deals, and RBC analysts said their survey shows investors believe there are attractive assets that fit Biogen. As of end of March, Biogen recorded cash totaling $4.75 billion and net debt of $2.52 billion.
The SVB team wrote to clients that dealmaking will “probably have to play a key role in any kind of strategic shift” at Biogen.
As part of a business shake-up, Biogen is taking another look at its R&D activities to “accelerate, terminate, divest, or partner certain programs,” or, as outgoing CEO Vountasos put it during a Tuesday call, to “rebalance” the risk profile of the portfolio.
As evident in Aduhelm, neuroscience is “higher up on the risk curve than most biopharma therapeutics areas,” the SVB analysts noted.
Given its expertise, Biogen will continue to stay within neuroscience, interim R&D chief Priya Singhal, M.D., said. But the company is also open to “adjacencies” to rebalance the risk, she added, because the “probability of technical and regulatory success changes as you move out of neuroscience.”
But how far will Biogen expand? Singhal pointed to Biogen’s Sage Therapeutics-partnered zuranolone, which the companies have started submitting to the FDA in major depressive disorder while awaiting a phase 3 readout in postpartum depression. Biogen also expects a phase 2 readout for BIIB104 in cognitive impairment associated with schizophrenia soon.
Singhal brought up Biogen’s late-stage lupus programs, anti-BDCA2 drug BIIB059 and UCB-partnered CD40L-targeted drug dapirolizumab. Lupus could be viewed as an extension of Biogen’s existing expertise in multiple sclerosis—including Tecfidera and Verity—as both are autoimmune diseases.
For their part, the SVB analysts argued that further branching into psychiatry at the expense of ill-fated R&D in neurodegeneration could help bring down the development risk in Biogen’s pipeline.
At the beginning of 2022, Stat reported that Biogen has compiled a potential buyout target list. At that time, the list reportedly included Biohaven Pharmaceuticals, maker of migraine therapy Nurtec ODT; autoimmune disease specialist Aurinia Pharmaceuticals, which has FDA-approved lupus therapy Lupkynis; and Amylyx Pharmaceuticals, with a future that now looks uncertain after an FDA advisory committee recently narrowly voted down its amyotrophic lateral sclerosis candidate.
Besides BD capabilities, almost as high on Biogen investors’ wish list for a new CEO was a history of cleaning up and selling companies, according to RBC’s poll. This means the company’s many challenges “may be obscuring value that could be better extracted through an acquisition,” the RBC team said.
Biogen was said to be on Merck's M&A radar back in October, The Financial Times reported at the time, but it's unclear whether Merck seriously considered a buyout.