Biogen’s growth strategy includes M&A deals and the drugmaker is making a big one with the $7.3 billion buyout of Reata Pharmaceuticals, a rare disease company whose main asset is the only FDA-approved therapy for an ultra-rare neuromuscular disorder.
According to deal terms announced Friday, Cambridge, Massachusetts-based Biogen agreed to pay $172.50 share for each Reata share, a nearly 59% premium to the stock’s closing price on Thursday.
Reata’s drug, Skyclarys, was approved in February for treating Friedreich’s ataxia, an inherited disease that leads to progressively worsening muscle weakness. That weakness is due to low levels of a protein key to the function of mitochondria, the energy-producing components of cells. The Reata small molecule restores mitochondrial function by targeting a different protein called Nrf2. Plano, Texas-based Reata estimates there are about 5,000 Friedreich’s ataxia patients in the U.S. Skyclarys is currently under regulatory review in Europe.
Biogen sees Skyclarys as complementary to its own neurological disease drugs. The company markets Spinraza, a blockbuster drug that was the first FDA-approved therapy for spinal muscular atrophy. In May, the company won FDA approval for Qalsody, a drug that treats amyotrophic lateral sclerosis patients whose disease is characterized by a particular genetic mutation. Speaking during a conference call Friday, Biogen CEO Chris Viehbacher said the overlap of Friedreich’s ataxia with other neuromuscular diseases creates synergies for the commercialization of Reata’s drug.
“As we evaluated this opportunity, it became increasingly clear that Biogen would be the natural owner for Skyclarys,” he said. “Commercial execution in the rare disease space is a very distinct skillset built up over time. We see a significant complementarity with our existing global commercial infrastructure with Spinraza, and of course, more recently, Qalsody.”
The Reata acquisition is Biogen’s first major deal since Viehbacher joined as CEO last November. He succeeded Michel Vounatsos, whose tenure brought the accelerated approval of Alzheimer’s drug Aduhelm. However, that drug was a commercial failure due to concerns and questions about the drug’s safety, efficacy, and price. Viehbacher, a former Sanofi and GSK executive, was brought on to put Biogen back on track.
Viehbacher said that in the early part of this year, a Biogen team started looking at the biopharmaceutical landscape to see what could fit with the company. He added that he would like Biogen to become stronger in rare diseases and acquiring Reata’s drug is a move in that direction. Reata also has other programs in its pipeline. Though they are in early stages of development, Viehbacher said that their targeting of the Nrf2 protein fits with a number of diseases Biogen is already looking at, such as ALS and Alzheimer’s.
While Skyclarys currently stands alone as the only FDA-approved therapy for Friedreich’s ataxia, other companies are developing therapies for the rare disease. PTC Therapeutics was the closest potential competitor with vatiquinone, a small molecule that reached Phase 3 testing. In May, the company reported the drug failed its pivotal study. A fusion protein from Larimar Therapeutics is currently in early-stage testing. A Solid Biosciences gene therapy is currently in preclinical development. Viehbacher said those treatments are far in the distance and even if they reach the market, Friedreich’s ataxia could be treated with combinations of therapies.
“We do think [Skyclarys] can become the backbone of therapy,” he said.
William Blair analyst Myles Minter echoed those sentiments, writing in a Friday research note that Skyclarys has many years ahead as the sole treatment option for Friedreich’s ataxia patients. The firm sees the Reata acquisition fitting within the Biogen growth strategy. The blockbuster potential of Skyclarys could offset eroding revenue from Biogen’s aging multiple sclerosis franchise as the rest of the company’s pipeline matures, Minter said.
The Reata acquisition comes at a time of transition for Biogen. In its report of second quarter 2023 financial results earlier this week, Biogen announced a corporate plan to find $1 billion in savings. About $300 million of those savings would be reinvested in product launches and R&D. This “fit for growth” plan will also lead to the layoff of about 1,000 staffers.
The acquisition has been approved by the boards of directors of both companies, but still needs Reata shareholder approval as well as regulatory approvals. Biogen and Reata expect to close the transaction in the fourth quarter of this year.
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