By Dana Mattioli, Jonathan D. Rockoff and Dana Cimilluca
Biotechnology giant Biogen Inc. has drawn takeover interest from
drug companies including Merck & Co. and Allergan PLC, raising
the possibility of another huge deal in the health-care
industry.
Merck and Allergan have each sounded out Biogen on the
possibility of a takeover, people familiar with the matter said.
The communications were informal and preliminary, and they may not
result in a deal -- in part because Biogen may not be interested,
they added.
Biogen had a market value of $68 billion on Tuesday afternoon.
It isn't clear whether other large drug companies also are
contemplating a purchase of the company, which is searching for a
new chief executive.
Whether there is a deal or not, the interest in Biogen shows the
hunger big pharmaceutical companies have for new sources of
growth.
After years in which their pipelines were depleted, new-drug
approvals are up. But the companies have become so large that
adding a new blockbuster drug in many cases isn't enough to
increase growth substantially -- especially given the pricing
pressures that they face. Merck had a market value of $162 billion;
Allergan's was $101 billion.
Biogen had sales of $10.8 billion last year, up 11%. The
company, based in Cambridge, Mass., dominates the lucrative market
for multiple-sclerosis drugs, now worth nearly $20 billion a year.
Its Tecfidera treatment for the condition had one of the best
new-drug launches after its 2013 approval, and Biogen stock has
roughly doubled since the beginning of that year, even after a
sharp recent drop.
Following The Wall Street Journal report Tuesday, Biogen shares
closed up 9.4% to $330.11.
Biogen shares have dropped from a high of nearly $500 they
touched early last year, amid worries about its growth prospects.
Tecfidera sales have slowed as competitors like Roche Holding AG
develop rival treatments.
The decline in Biogen stock may be seen as an opening for
prospective suitors who also may view the company as vulnerable to
a takeover because it is in flux.
Last month, Biogen Chief Executive George Scangos said he would
step down in coming months -- just as the company topped
second-quarter expectations, provided an upbeat earnings outlook
and unveiled a $5 billion share buyback. Biogen said it is
searching for a new CEO. It also is spinning off its faster-growing
but small hemophilia-drugs unit.
To be sure, Biogen's pipeline of drugs in development is
considered by some on Wall Street to be highly risky. The company
has spent heavily on potential treatments for Alzheimer's, a
disease that has consistently frustrated drugmakers.
But Biogen's research in Alzheimer's and strength in multiple
sclerosis would also make it attractive to the likes of Merck and
Allergan.
One of Allergan's top-selling products is Alzheimer's drug
Namenda. Biogen's multiple-sclerosis therapies would add to
Allergan's portfolio of drugs that treat central-nervous-system
disorders.
Dublin-based Allergan has been an active deal maker in recent
years, usually with friendly targets, as it has sought to leverage
a low-tax domicile and build a portfolio that is among the
industry's fastest-growing.
In April, Allergan and Pfizer Inc. walked away from a proposed
$150 billion merger after the government took steps to deter deals
known as tax inversions. The combination would have helped Pfizer
lower its corporate tax rate by moving its headquarters abroad.
Allergan on Tuesday closed the $40.5 billion sale of its
generic-drugs business to Teva Pharmaceutical Industries Ltd. The
sale provides a windfall of cash Allergan could use to help pay for
a large acquisition.
Adding Biogen's drugs for multiple sclerosis -- a condition that
affects more women than men -- would complement Merck's portfolio
of female-health products, including birth-control device NuvaRing.
Like Biogen, Merck is investing heavily in finding new Alzheimer's
treatments.
Merck is trying to return to consistent sales growth after
several years of declines, as some of its older drugs have been
hurt by generic competition. Sales in its Januvia franchise have
slowed because of intense competition in the diabetes market.
To help rejuvenate its pipeline, Merck, based in Kenilworth,
N.J., has been on a buying spree of late. Last year, it bought
Cubist Pharmaceuticals for about $8 billion. In July, it acquired
biotech Afferent Pharmaceuticals for about $500 million.
Merck's biggest deal to date was its roughly $50 billion
acquisition of Schering-Plough Corp. in 2009.
Any deal for Biogen would provide a jolt for a
mergers-and-acquisitions market that has been more subdued this
year following a record surge in 2015, when some $4.4 trillion of
deals were struck.
Total announced takeover volume world-wide stands at $1.97
trillion so far this year, down 19% from the same period in 2015,
according to Dealogic. Market volatility and the collapse of a
number of high-profile mergers have put a damper on deal making
this year, bankers say.
Health care has been hit particularly hard, with the government
scuttling Pfizer-Allergan and now seeking to block two big
health-insurer tie-ups announced last year: the proposed mergers of
Aetna Inc. and Humana Inc. and Cigna Corp. and Anthem Inc.
Companies involved in both deals have indicated they were ready to
fight to save their transactions.
Health care is the third-busiest sector for M&A globally
this year, after technology and real estate; last year it was
second after technology.
Year to date, there have been $185 billion in announced
health-care deals globally, according to Dealogic. That is less
than half the volume for the same period in 2015.
Write to Dana Mattioli at dana.mattioli@wsj.com, Jonathan D.
Rockoff at Jonathan.Rockoff@wsj.com and Dana Cimilluca at
dana.cimilluca@wsj.com
(END) Dow Jones Newswires
August 03, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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