Biogen investors’ worst fears have come true with the failure of its phase 3 Alzheimer’s prospect, and now, it may be “buy or be bought” time for the Big Biotech.
Thursday, Biogen and partner Eisai said they'd given up on their program for aducanumab—or, as RBC Capital Markets analyst Brian Abraham nicknamed the candidate, “adu-CAN'T-umab”—after a futility analysis showed trials would be unlikely to hit their primary endpoints. By mid-morning, shares had plunged by more than 27%, and some analysts predicted they could sink further.
So what are Biogen’s options now? The way some analyst see it, the company may not have many. “We cannot find any near-term catalysts that would help the stock recover back above $300,” Leerink Partners’ Geoffrey Porges wrote in a note to clients.
Jefferies’ Michael Yee was succinct with his evaluation. “They need to do M&A,” he wrote, though he acknowledged the company wasn’t exactly in the best position to compete for deals. “Bears will note … they will have to now be overly aggressive on M&A due to desperation,” he said.
RBC’s Abrahams agreed, writing to his own clients that “appreciation following today's likely sharp downside would be contingent on a more aggressive business development approach.” And unfortunately for Biogen, it’ll now come to the dealmaking table “from more of a position of weakness,” though Abrahams did note that “today’s failure could bring the biotech space down as a whole today.”
Back in January, Biogen executives spoke to their deal preferences, saying they “would love to get something larger” with “multiple phase 3 assets,” as quoted by Mizuho analyst Salim Syed. But at the time, they said such a move was “not essential.”
It doesn't look inessential today. While Biogen has other assets, a major one—multiple sclerosis pill Tecfidera—could soon be in trouble. Yee ascribed, “in our view, a reasonable 60% to 70% probability that Tecfidera patents could be in jeopardy” due to an ongoing inter partes review.
Of course, biopharma this year has already watched one hefty biotech under IP threat get scooped up in a mammoth deal—and that’s Celgene. Early in the year, Bristol-Myers Squibb agreed to swallow the New Jersey drugmaker for $74 billion despite potential patent troubles for lead drug Revlimid.
In light of that move, Yee predicted a Wall Street debate over “if there is now M&A value for durability of MS tail after watching Celgene get acquired despite its underlying issues with Revlimid IP.”