Biogen Soars on Takeover Rumors

Shares of Biogen (BIIB) soared 9.37% today on news that the biotech firm might be bought by a larger rival. It was a dramatic day of trading for Biogen. The WSJ reported the takeover at 2:42 pm, and the shares quickly jumped from around $300 to near $330. Trading in the stock was halted for a brief period.

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Specifically, the news is that both Merck and Allergan are interested in buying Biogen. BIIB has struggled since its peak at $480 in March 2015. That’s one of the reasons why I added it to this year’s Buy List. Allergan wanted to hook up with Pfizer earlier this year, but the government blocked a possible inversion.

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.

One analyst at RBC Capital said Biogen could fetch between $375 and $475 per share. After the market closed, CNBC reported that Allergan is unlikely to pursue a deal.

Posted by on August 2nd, 2016 at 11:47 pm


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