Biogen saw its share price $BIIB pop up more than 5% Tuesday morning as the company reported sharply higher revenue for Spinraza, indicating that they have a major commercial hit on their hands. And CEO Michel Vounatsos is seizing the moment, outlining plans to invest hundreds of millions more each year in its neurosciences R&D work as he plans to fulfill a vow to make Biogen the leading company in the field. Those plans include late-stage acquisitions and “deals of all sizes.”
To do that, Biogen said that it plans to “streamline” operations — usually code for layoffs, which is a tactic that Biogen employs regularly — with a plan to boost “prioritized R&D and commercial value creation opportunities” by $400 million a year by 2019.
This strategy will rely on seeing the business development team get busy on deals, something analysts have been waiting for now for more than a year.
Here’s the pledge:
Biogen’s new priority for capital deployment is to invest in building its pipeline through increased business development activity. The Company continues to focus on maximizing long-term shareholder value creation, and aims to deploy capital to generate returns meaningfully above its cost of capital. Biogen views investment in growth as its top priority, but also recognizes the value of opportunistically returning excess capital to shareholders through share repurchases.
“We will explore deals of all sizes and will remain disciplined about our approach,” Vounatsos told analysts in the morning call. And the executive team underscored that the company plans to add late-stage assets to the pipeline, underscoring their willingness to spend big.
Biogen has done deals over the past year, but a number of analysts have complained that they haven’t seen the company get down to business in earnest. Vounatsos took over as CEO in that environment at the beginning of the year, after a long stretch with George Scangos at the helm. Case in point, Geoffrey Porges noted at JP Morgan in January that:
Biogen has one of the cleanest balance sheets in large cap biotechnology and could afford to take on leverage for meaningful neuroscience M&A deals.
Biogen has a big focus on new Alzheimer’s drugs, pursuing a pivotal program for aducanumab as well as bagging an anti-tau antibody from Bristol-Myers Squibb last month in a $360 million deal.
The question now is whether Biogen plans a string of new deals or a major, transformational buyout, the kind of M&A that the investment community has been lusting to see.
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