Please ensure Javascript is enabled for purposes of website accessibility

How Did Biogen Miss AveXis?

By Motley Fool Staff – Apr 16, 2018 at 4:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Biogen shareholders are probably not thrilled to see Novartis’ latest acquisition. What was Biogen thinking?

Last week, Novartis (NVS 2.24%) acquired gene therapy company AveXis for $9.8 billion -- giving Novartis access to a treatment that could potentially make Biogen-Ionis drug Spinraza more or less irrelevant.

In this segment from Industry Focus: Healthcare, host Michael Douglass and Motley Fool contributor Shannon Jones talk about some reasons why Biogen might have skipped out on this acquisition, as perfect as it might seem, as well as what Biogen shareholders should watch out for in the near future.

A full transcript follows the video.

This video was recorded on April 11, 2018.

Michael Douglass: Another question that I think a lot of people watching this deal are probably thinking is, what was Biogen thinking? Why didn't Biogen make this purchase? This is a drug that could directly impact Biogen's biggest success over the last couple of years, which was, to be clear, a partnered drug, they could have gotten the full rights to it, to this drug that, again, could be a lot bigger. They've certainly indicated that they're interested in companies kind of like AveXis. How did Novartis beat them to the punch?

Shannon Jones: That is the question of the ages, Michael. That is the reason why a lot of Biogen investors are probably scratching their heads right now. Of course, we can't see right now if this was some sort of a bidding war. If so, I really hope that Biogen was at the table for that conversation. If not, then I'm really disappointed that Biogen didn't at least try.

To your point, not only did this make sense from their own pipeline perspective, they are strategically refocusing themselves on neuroscience assets, they already have a preclinical gene therapy in play, so this would have made total sense for Biogen. The CEO has mentioned wanting to do more deals, and we really haven't seen that. There's been a couple of deals here and there, but we really haven't seen that yet. So, if it does come out that Biogen didn't even come to the table, if I was a Biogen investor, I would be really concerned.

Douglass: Yeah, I think that's very fair. And frankly, you look at Biogen, and they're incredibly concentrated. You look at their current revenue, it's basically multiple sclerosis. There's a little bit more, but that's pretty much it. You look at their pipeline, late-stage, we're looking at primarily Alzheimer's, which, companies unfortunately have an atrocious record at successfully bringing an Alzheimer's drug to market. It basically doesn't happen. Or at least, it hasn't happened historically, I suppose. So, it feels like there's a lot of concentrated risk there for a company that's that big. This could have been a great opportunity for them to diversify.

Of course, one of the things that Biogen's management said -- and I want to be clear here, they're not unique in this, pretty much everybody says this -- is that they want to buy things that will be accretive, but of course, they only want to buy at the right price. I'm not aware of any company that says, "We'll buy things at any price." But, it bears thinking here, did Biogen step away because they thought that the premium got too high?

Michael Douglass owns shares of Ionis Pharmaceuticals. Shannon Jones has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ionis Pharmaceuticals. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Novartis AG Stock Quote
Novartis AG
$76.32 (2.24%) $1.67

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.