After former Citron short target AveXis gets bought, analyst asks 'who's next'
AveXis (AVXS) shares are surging after the gene therapy researcher announced an agreement to be acquired by Novartis (NVS) for $218 per share, or $8.7B in cash. This comes two years after Citron Research made a short call on the name, with a $5 price target on AveXis. Commenting on the acquisition, Jefferies analyst Michael Yee noted that Novartis' two large gene therapy deals in four months raises the question of "who's next." AVEXIS SALE: AveXis announced that it has entered into an agreement and plan of merger with Novartis pursuant to which Novartis will acquire AveXis for $218 per share or a total of $8.7B in cash. This offer represents a premium of 88% to AveXis' closing price on April 6. The transaction was unanimously approved by the boards of both companies. Completion of the transaction is expected in mid-2018, pending the completion of the tender offer and all other closing conditions. NOT TOO SURPRISING: Following the announcement, Bernstein analyst Vincent Chen told investors that he has long suspected he would see acquisitions in gene therapy and that AveXis could be a prime candidate, so he is "not too surprised to see it go." However, the analyst acknowledged that he had not pegged Novartis as the top contender, initially favoring Roche (RHHBY) given signs of increasing interest in neuroscience and in Spinal Muscular Atrophy, with RG7916. While possible, especially as it would make sense for Roche and Biogen (BIIB), Chen does not believe other bidders for AveXis will emerge. Additionally, the analyst told investors that the announcement should be a positive for others in the space. Large cap biopharma could make moves into the space, as the field becomes increasingly de-risked with continued scientific progress, product approvals, pricing/reimbursement and commercial sales, he contended. OTHER GENE THERAPY PLAYERS: Meanwhile, Jefferies' Yee said he also believes that Novartis' deal for AveXis should remind investors about ongoing "attractiveness within smid-cap biotech," specifically within the gene therapy and cell therapy space. Novartis' two large gene therapy deals in four months will lead to a question of "who's next," the analyst contended. Among the mid-late stage gene therapy players remaining in the space are Bluebird Bio (BLUE), Spark Therapeutics (ONCE), BioMarin (BMRN), Abeona Therapeutics (ABEO), Regenxbio (RGNX), Nightstar Therapeutics (NITE) and Voyager Therapeutics (VYGR), Yee noted. Regarding Biogen, the analyst argued that this is a neutral event as he assumed AveXis would have obtained FDA approval within the next year or so and would have launched regardless of acquisition and would be a future competitor in SMA. Yee concludes that Biogen is being disciplined with its capital given it already has a gene therapy product entering Phase I for SMA and can go after other areas within neuro. WHAT'S NOTABLE: Back in 2016, Citron Research made a short call on AveXis, with a $5 price target. "In the case of AveXis, all you need is a healthy dose of skepticism, willingness to do the research, and a bit of empathy to reveal that there's nothing here beyond a glorified stock promotion. It will soon trade in the single digits," the report read. Citron added: "Given the extremely shady backgrounds of AveXis management and the dubious track records of the lead investigators at the single clinical site at which its drug is trialed, investors need to apply professional skepticism to the much-touted 'two babies sitting up' claim in AveXis's trial findings, absent any proof that these babies in fact were symptomatic for SMA Type 1 disease." PRICE ACTION: In morning trading, shares of AveXis have jumped almost 80% to $207.17, while Novartis' stock trading in New York has gained about 1% to $80.93. AVXS NVS RHHBY BIIB BLUE ONCE BMRN ABEO RGNX NITE VYGR