BioRegnum: What’s the deal with Biogen?

The view from Endpoints

“We are in a world of eat or be eaten,” Cowen’s Eric Schmidt told the Boston Globe about Biogen. “If they don’t redeploy their cash efficiently or properly, there’s always a chance that somebody may come in and monetize their assets for them.”

Sound familiar? That was from a year ago, as a setback on its new Alzheimer’s drug coincided with faltering Tecfidera sales to set the stage for what has become a mantra: Biogen has to either get moving and start striking some major drug deals, or it will face a takeover. So it’s no wonder that with no blockbuster-style deals in 12 months, we’re seeing reports pop up now as executives at other Big Pharmas have started sounding out Biogen’s board members about their interest in selling the company.

The bigger question: Why did it even take this long?

A new report from Reuters adds a few telling details to this week’s hot story from the Wall Street Journal that Biogen has been informally approached about a possible buyout by Merck and Allergan. The overtures were largely casually directed at individual board members. And they appeared mostly designed to see if there was some kind of interest in a friendly merger.

Not surprisingly, Merck’s interest is stronger than Allergan’s, according to Reuters. But there was never anything formal put on the table.

CEO George Scangos

CEO George Scangos

Whether or not Merck or any other company will make an offer, the rumors are swirling around a company that has become distinctly vulnerable over the past year as its flagship drug wanes. Biogen doesn’t have the kind of pipeline that gives analysts cause to cheer near term catalysts. And with CEO George Scangos now standing with one foot out the door, the company will have to undergo major pipeline changes in order to win back Wall Street’s enthusiasm for this company.

One way of doing that, and moving past the M&A rumors, is by finally grabbing hold of a late-stage deal that has impressive potential. Celgene and Gilead have proven several times over the past year that there are major partnerships to be had. And Biogen’s slow motion response may explain why Scangos will soon be devoting more time to the family back on the West Coast. As of now, Biogen execs have only been able to promise landmark deals, without delivering.

Yes, there was an interesting gene therapy collaboration at the University of Pennsylvania, but that’s a discovery deal. There was a pact with Mitsubishi Tanabe last fall, for a Phase II autoimmune drug; not enough to rev up much excitement. So we’re left with fresh promises to consider.

Here’s Scangos from the Q2 call:

Actually, we would look at deals at all stages of development from pre-clinical through Phase 3. And we are currently doing that. We’re in a number of discussions now, and we hope to bring some of those to conclusion.

We are focused largely on neurology. That’s where we have our core expertise. And I think we believe that the – you can make more sophisticated decisions about things in areas that you understand really in detail. So mainly we’re looking in neurology. With (R&D chief) Mike (Ehlers’) arrival, we have a new person here who’s got his own set of expertise, his own views on things. And I would say we wouldn’t rule out things outside of neurology, but the bar gets higher as they get further from our center of excellence. As Mike put it yesterday, we want to have kind of laser vision, but we don’t want to have tunnel vision. We want to be open to things that are interesting and can provide shareholder value.

We’re well past the point when it became obvious that Biogen had to eat or be eaten. It may well need to find something outside of neurology as well, which has been Scangos’ comfort zone. And the deal(s) needs to involve late-stage assets with blockbuster potential.

The expectations keep getting higher and the takeover rumors aren’t going away until Biogen finally delivers.

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VP Oncology Biology
Skyhawk Therapeutics Waltham, MA
Director Process Development
Elektroki Boston, MA
Director Process Development
Elektroki Boston, MA
Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT

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