Citi Surprised, Confused Amid Report Biogen May Divest Hemophilia Unit

Reuters reported on Friday that Biogen Inc BIIB is exploring the sale of its hemophilia business. Citi’s Robyn Karnauskas maintained a Buy rating for the company, with a price target of $345, saying that the news is both “surprising and confusing,” since previously the company had indicated it would use cash for M&A.

Analyst Robyn Karnauskas mentioned that the news comes as a surprise, since the franchise is growing and peers in the sector “are looking to diversify.” He added that Biogen is facing significant uncertainty in 2016, “ahead of several binary events,” and the sale of the hemophilia unit would increase the company’s leverage to the MS marketplace.

Possible Scenarios After Sale Of Hemophilia Unit

“While we do not know if such a sale will take place, we see the FV of the Hemophilia Biz at $4.8-$6.4B on NPV basis,” Karnauskas wrote. He enumerated three possible scenarios following a divestiture of the unit as:

1. Cash used to acquire a bigger strategic asset
2. Cash used for buybacks
3. Attempts to make the company leaner and more attractive as a potential M&A target.

The analyst pointed out, however, that the acquisition of Biogen would be challenging due to the uncertainty related to the “Forward Pharma patent issue regarding Tecfidera.”