Biogen Inc. agreed to acquire Reata Pharmaceuticals Inc. for $7.3 billion including debt to expand its rare disease treatments in one of its biggest-ever acquisitions.
(Bloomberg) — Biogen Inc. agreed to acquire Reata Pharmaceuticals Inc. for $7.3 billion including debt to expand its rare disease treatments in one of its biggest-ever acquisitions.
The Cambridge, Massachusetts-based biotech company will pay $172.50 in cash for each Reata share, it said in a statement Friday, confirming an earlier Bloomberg News report. That represents a 59% premium to Reata’s Thursday closing price.
Reata received US Food and Drug Administration approval in February for Skyclarys, the first approved treatment for Friedreich’s ataxia, a rare inherited disease that can affect children as young as five and causes impaired walking and coordination. The treatment could generate peak sales of $1.5 billion, according to Barclays Plc forecasts.
“We believe Biogen has the foundation in place to accelerate the delivery of Skyclarys to patients around the world,” Biogen Chief Executive Officer Christopher Viehbacher said in a statement. “This is a unique opportunity for Biogen to bolster our near-term growth trajectory.”
In premarket trading, Reata rose 52% at 9:07 a.m. in New York. Biogen shares gained 2.1%.
Bloomberg News reported earlier Friday that Biogen was exploring a potential acquisition of Reata. Biogen plans to finance the acquisition with cash on hand, supplemented by the issuance of term debt, and expects it to be accretive to earnings starting in 2025.
Company Transition
Biogen is in transition as it attempts to broaden its focus and come up with new growth sources to replace aging multiple sclerosis drugs. Viehbacher, who took over as CEO last year, has promised to redesign the company and reduce its dependence on risky neurology research without eliminating the ability to pursue hard diseases like Alzheimer’s. He has highlighted rare disease as an area the company wants to expand in.
The new deal fits well with Biogen’s current portfolio, as Reata’s lead product is both a rare disease drug and a neurology medicine. Approved in February, it’s the first marketed drug for Friedreich’s ataxia, a rare inherited neurological disease that afflicts roughly 1 in 50,000 people, according to the FDA.
“Acquiring Skyclarys falls directly in the rare disease category, which is consistent with management’s prior commentary related to area of focus for potential M&A deals,” Wedbush Securities analyst Laura Chico wrote in a note to clients. She said there were “many parallels” between this transaction and Sanofi’s acquisition of Genzyme Corp. in 2011 during Viehbacher’s tenure as CEO of the French drugmaker.
Like many recently-approved neurology drugs, Skyclarys had a complicated path to approval. After a phase 2 study yielded positive results, Reata said in November 2020 that it might have to conduct another big study to confirm the results in order to gain clearance. But less than a year later, after meeting with the FDA again, Reata said that it would be able to submit for approval without a new study.
After it filed for approval last year, Reata said that the FDA would likely convene a meeting of outside advisers to review the drug, a step the agency often takes for complicated or controversial drug applications. But in October, after it submitted new data analysis, Reata said the agency had decided not to hold the hearing. That paved the way for the approval.
Declining Sales
The deal is subject to approval by shareholders of Plano, Texas-based Reata and is expected to close in the fourth quarter. Investors holding 36% of the voting power of Reata’s common stock have agreed to support the deal. The Betaville blog wrote on Thursday about market speculation that Reata had attracted takeover interest.
Biogen hasn’t been the most acquisitive company over the years. In 2013, it bought the remaining stake in the multiple sclerosis medicine Tysabri for $3.25 billion in cash from its partner Elan Corp. In 2020, it acquired a minority stake in Sage Therapeutics Inc. for about $1.5 billion. Biogen’s shares have fallen about 5% this year, giving it a market value of around $38 billion.
Earlier this week, Biogen said it would cut 1,000 jobs, or more than 11% of its workforce, and reduce operating expenses in an attempt to grapple with declining sales from treatment for multiple sclerosis, its biggest drug category.
Biogen received FDA approval earlier this year for its drug Qalsody to treat a rare form of amyotrophic lateral sclerosis, sometimes called Lou Gehrig’s disease, which destroys nerve cells that control voluntary muscle movement including breathing.
Lazard Ltd. advised Biogen on the deal, while Reata worked with Goldman Sachs Group Inc.
(Adds shares in fifth paragraph, analyst reaction and Reata details starting in eighth paragraph.)
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