Days after its stock plunged on an announcement that it would end two Alzheimer's treatment trials, Biogen (BIIB) announced plans to buy back $5B of its stock.
BUYBACK PLANS: Biogen announced in a regulatory filing that on March 24, its board authorized a program to repurchase up to $5B of the company's stock. The share buyback is in addition to the approximately $1.7B remaining under the stock repurchase program authorized by its board in August 2018, the company said in the filing. The program does not have an expiration date, it added.
WHAT'S NOTABLE: The buyback plans come just days after the company said it would discontinue the ENGAGE and EMERGE global Phase 3 trials designed to evaluate the efficacy and safety of aducanumab in patients with mild cognitive impairment due to Alzheimer's disease and mild Alzheimer's disease dementia. Biogen was developing the drug in partnership with Japan's Eisai (ESALY). The decision to stop the phase 3 trial is based on an independent data monitoring committee's analysis showing that the trials were unlikely to "meet their primary endpoint." The recommendation to stop the studies was not based on safety concerns, Biogen said.
Biogen shares had lost more than $18B of their value last week following the news.
"This disappointing news confirms the complexity of treating Alzheimer's disease and the need to further advance knowledge in neuroscience," Biogen Chief Executive Officer Michel Vounatsos said on Thursday. "We are incredibly grateful to all the Alzheimer's disease patients, their families and the investigators who participated in the trials and contributed greatly to this research."
Last June, Eli Lilly (LLY) and AstraZeneca (AZN) ended two trials for lanabecestat, an experimental Alzheimer's drug they were developing, after a committee found those trials also would not achieve their goals. Earlier in 2018, Pfizer (PFE) said it would stop trying to fund new drugs to treat Alzheimer's and Parkinson's disease.
ANALYST COMMENTARY: Analysts continued to weigh in on Biogen following the myriad of analyst commentary on Thursday following Biogen's trial discontinuation news, with several saying they believe investors will now shift their focus to Biogen's other drugs, particularly competition surrounding Spinraza and Tecfidera.
H.C. Wainwright analyst Andrew Fein lowered his price target for Biogen to $300 and said investor focus will likely now shift to the pipeline growth and defense of Biogen's multiple sclerosis franchise. He thinks Spinraza should continue to drive revenue growth in the near-term and believes Biogen has sufficient financial means to continue investing in the pipeline to support the long-term growth of the company. RBC Capital analyst Brian Abrahams lowered his price target on Biogen to $236 and said that investors will now shift their focus towards the upcoming IP developments risks for Tecfidera and potential competition to its Spinraza, but also sees "few near-term opportunities to generate enthusiasm" for Biogen's ability to "fill the gap left by aducanumab and out-year loss of base business revenues."
On Friday, Morgan Stanley analyst Matthew Harrison downgraded Biogen to Underweight from Overweight, admitting that his optimism on Alzheimer's was "completely wrong." Without that potential upside driver, Harrison said he does not expect a near-term recovery in Biogen shares, though he admits that a significant acquisition that accelerates topline growth "represents the major risk" to his Underweight thesis. Absent M&A, he sees no near-to-midterm upside driver and believes downside risks from Spinraza competition and challenges to Tecfidera's patents are exposed. UBS analyst Carter Gould downgraded Biogen to Neutral and said the failure of aducanumab leaves Biogen with a lack of visibility around a path back to sales growth. As a result, the threats to Tecfidera intellectual property beyond 2020 and competition to Spinraza "should dominate the narrative over the near-term," Gould said. Citi analyst Robyn Karnauskas also downgraded Biogen to Neutral and said the failure in Alzheimer's disease raises questions about Biogen's strategy and its ability to grow.
PRICE ACTION: In morning trading, Biogen shares are up about 0.5% in morning trading to $217.64.
Keywords: buyback, repurchase, drugs, Alzheimer's disease, AD, aducanumab, primary endpoint, analyst, commentary