Biogen (BIIB 3.40%) recently suffered a brutal stock market beating after its big Alzheimer's candidate failed to make a difference for patients with early signs of the disease.
Biogen's market value was reduced by nearly a third in a few short days, and that puts it in range for a big pharma buyout. If Biogen follows the standard industry handbook, management will acquire a medium-sized biotech soon. Biopharma management teams like to look busy during a time of crisis, plus bulking up helps prevent the loss of their jobs due to a takeover.
These two takeout targets have what team Biogen's looking for -- plus there's a good chance acquiring them could also work out well for Biogen's shareholders down the line.
|Company (Symbol)||Specialty||Market Cap|
|Neurocrine Biosciences (NBIX 0.95%)||Neurology and Endocrinology||$8.0 billion|
|Sage Therapeutics (SAGE 2.20%)||Neurology||$7.8 billion|
Neurocrine Biosciences: A great way to branch out
This takeout target has one of the most impressive track records in recent memory. In 2017, Neurocrine's first drug Ingrezza earned Food and Drug Administration (FDA) approval for the treatment of tardive dyskinesia (TD), and it already racked up annual sales of $410 million last year.
Neurocrine's collaboration partner AbbVie took the reigns for Orilissa years ago, and last year it earned approval to treat endometriosis pain. An application to treat the larger population affected by uterine fibroids is on the way and it's supported by results that should please regulators and millions of women who need a new treatment option.
Neurocrine's team could also teach Biogen how to pick winners from unlikely places. In 2017, Neurocrine licensed opicapone from BIAL, a Portuguese biopharma company that has been marketing the Parkinson's disease drug in the EU since 2016. Now that Neurocrine has data from two phase 3 trials that prove opicapone safely extends the usefulness of standard levodopa treatments, an application heading to the FDA has a pretty good chance at earning approval.
Neurocrine also has a rare disease drug heading for a phase 3 trial. Classic congenital adrenal hyperplasia affects around 25,000 Americans who rely on regular replacement therapy for the adrenal steroids they have trouble producing on their own. NBI-74788 is an oral treatment that blocks the release of a hormone secreted by the pituitary gland, which, in turn, reduces the amount of corticosteroid therapy these patients need to thrive.
To top it off, Neurocrine has already dipped a toe in the gene therapy pool by signing a new collaboration deal with Voyager Therapeutics. In March, Neurocrine handed Voyager $165 million for rights to VY-AADC, an experimental gene therapy for the treatment of Parkinson's disease that's ready to begin a pivotal study.
Sage Therapeutics: A quick fix for severe depression
Sage Therapeutics is another company focused on neurology that could be a perfect fit for Biogen. The company recently celebrated its first new drug approval for Zulresso, which is also the first available treatment for severe postpartum depression.
Around 120,000 women in the U.S. go through treatment-resistant bouts of postpartum depression (PPD) each year. Suicide is the leading cause of death among new mothers, partly because there haven't been any available treatments that can get stalled GABAa receptors firing on all cylinders long enough to run well on their own.
Sage will find marketing Zulresso extra challenging because it requires a 60-hour non-stop infusion under supervision. Severely depressed patients will probably be glad to give up 2 1/2 days for a chance to feel like themselves again quickly, but getting insurers to pay the hospital bills could make it a tough sell.
Sage has another PPD candidate on the way called SAGE-217 that's a novel, synthetic version of Zulresso's active ingredient. The main difference is that SAGE-217 can be taken as a capsule because it remains in circulation much longer than Zulresso.
Trial results so far suggest Neurocrine has a potential winner here. During a pivotal study with PPD patients, investigators measured significant improvements after just three days of treatment with SAGE-217, and all patients had to do was swallow some capsules.
Check out the latest earnings call transcript for Biogen.
There's also a pretty good chance that SAGE-217 will become a fast-acting antidepressant for the acute treatment of major depressive disorder (MDD). Around 16 million adults in the U.S. experience a major depressive episode each year. Most of them would benefit from a treatment that can help restore their vitality in a few days, or at least reach a level that long-term antidepressants like Zoloft can handle.
SAGE-217 made a significant difference in a mid-stage study with just 89 MDD patients. If it can repeat the success in an ongoing pivotal study, SAGE-217 will easily go on to generate several billion annually for Neurocrine in a few short years.
Biogen finished 2018 with $3.5 billion in cash on its balance sheet, and the company earned $5.3 billion in free cash flow last year. That puts one of these companies within reach, but not both.
Luckily, everyday investors don't have that problem. This is good news because buying both of these takeout targets and holding them even if they aren't acquired isn't a bad idea.