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What Does Biogen's New CEO Mean For The Buyout Argument?

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What Does Biogen's New CEO Mean For The Buyout Argument?

Following an announcement by Biogen Inc (NASDAQ: BIIB) elevating Michel Vounatsos, the company's chief commercial officer and a recent hire from Merck & Co., Inc. (NYSE: MRK), as CEO, Jefferies said the near-term potential for a takeout is reduced. The firm continues to see the reward/risk as balanced.

Shifting To An Operational Leader

Analyst Brian Abrahams noted the hiring, taking effect from January 6, 2017, represents an evolution, reflecting the current state of affairs that would likely benefit from a leader with operational and capital allocation expertise. The incumbent George Scangos had announced his intent to step down this summer during the second-quarter conference call.

Challenges Galore

Jefferies sees sense in the company appointing an operational-focused CEO, as the company is facing challenges, including MS sustainability, patent cliffs and market share retention. According to the firm, backfilling the pipeline by pushing forward internal R&D projects and/or actively seeking BD initiatives is important, as much of the pipeline or high science initiatives such as aducanumab and nusinersen have matured, or is maturing.

M&A Chatter Dying Down Ahead of Announcement

Highlighting the credentials of Vounatsos, Jefferies noted that he has 20 years of operational experience at large pharma as well as a medical background. Even ahead of the announcement, the firm noted that the potential of the company being a takeover target has diminished, given the recent stock declines into and post CTAD.

The firm said it gets a sense that the company will pursue its path independently, with the near-term materialization of a potential M&A event being reduced due to an internal hiring. However, the firm sees the temporary gap in the key CCO position as a negative.

As such, Jefferies has a Hold rating and a $310 price target for the shares of Biogen.

In pre-market trading, Biogen shares were slipping 0.63 percent to $277.02. However, by time of publication, Biogen shares were up 1.4 percent at $282.68.

Latest Ratings for BIIB

DateFirmActionFromTo
Nov 2020RBC CapitalMaintainsSector Perform
Nov 2020DZ BankUpgradesHoldBuy
Nov 2020B of A SecuritiesDowngradesNeutralUnderperform

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