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European pharmaceutical interest in Biogen Idec could be waning as Roche and Sanofi Aventis are thought to have walked away from the auction process, people familiar with the situation told dealReporter. Spokespeople for Swiss-based Roche and France-based Sanofi declined to comment for this story.
One of the people said it was his understanding that there is not a lot of appetite for Biogen from European groups. ”European players are not that enthusiastic to jump on the train,” he said.
He added that he was confidant Sanofi and Roche would no longer be interested as bids for the first round are due. The difficulty in appraising Biogen’s assets and coming to an agreement with Elan and Genentech over their partnerships with Tysabri and Rituxan, respectively, were some of the reasons cited as why Europeans are walking away.
The second person familiar with the situation noted that with Biogen’s stock trading in the mid USD 70s, the market clearing price for a deal would be USD 80 to USD 85 per share. This is considered very expensive among European buyers, as the first person explained that such a total transaction value at USD 23bn is ”very difficult to argue, defend and justify”.
Both people agreed that buyers need to believe in all three of Biogen’s marketed drugs: Tysabri, Avonex, and Rituxan, as well its pipeline of drugs in development.
”You really have to believe in them, and each have their own issues. If any buyer after doing some due diligence doesn’t really truly believe in all the upside in these products, they are not going to get any of these prices,” the person said.
Avonex has peaked in growth, said a market investor, and faces patent expiry in 2011. The growth is in the multiple sclerosis drug, Tysabri, but a big question mark still lingers on its future success. Tysabri was taken off the market in 2005 after three patients in clinical trials developed PML (progressive multifocal leukoencephalopathy), a rare, but fatal brain infection. Two of the three cases resulted in death.
The investor also added that Biogen has been spending USD 800m plus in research and development and the plan is to spend USD 5bn over the next five years. He said clearly Biogen sees some value and excitement over some of the drugs in various clinical trial phases.
The investor said that buyers will be evaluating three independent factors in making their decisions: one is the growth of Tysabri; second is the synergies a buyer will have with Biogen and third will be the view on the pipeline.
At least two to three US parties are also thought to have dropped out of the process, and a third person familiar with the situation said that interest is waning across the board, both in Europe and the US. He commented that companies are not interested at the current price given the complexity of the deal. He said there is talk now of a potential busted auction.
A banking source said that USD 75 is considered expensive even now for the asset. But the two people familiar and a fourth person said that Pfizer and Johnson & Johnson continue to be interested as part of their separate strategies to look for acquisitions.
As this news service previously indicated, Pfizer was believed to have prompted the whole sale process, which was announced on 12 October following Carl Icahn’s USD 23bn proposal. Although market sources have put Pfizer’s initial bid between USD 50 to USD 65, the second person familiar speculated that the US buyer was not even comfortable with that valuation range. A Pfizer spokesperson declined to comment for this story.
The second person familiar said he would be somewhat surprised if Pfizer paid a ”gigantic price” now. He said he believed Johnson & Johnson would look but was not sure if they would make it all the way to the final round.
In any event, the second person said that Biogen is aiming to get a deal signed by year-end. A second industry investor concurred that management’s goal would be to conclude a deal by end of December.
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