With both Merck and Allergan reportedly in early takeover talks, Biogen may wind up with a bidding war on its hands. In a best case scenario, we’re probably looking at a buyout in the $400-420/share range. That would be about a 27-33% premium over the company’s Wednesday trading price, but a far cry from the stock’s all-time high around $475 hit in March of last year.
On the lower end of things, we could see an offer as low as $350-375/share. Biogen might scoff at such a low number, but considering the stock traded as low as $223 last month, they may not have much room to be picky. If potential suitors start looking under the hood and see things they don’t like, the offer price could dip very quickly.
Research firm RBC Capital Markets put out a note today examining the M&A potential as well. RBC has a $375 price target on BIIB, and says the company is undervalued considering its strong pipeline and current business. The firm also notes that if Biogen’s Alzheimer’s treatment proves effective, its valuation would skyrocket considerably (their $375 target is based on 50% probability of the treatment succeeding).
So on one hand, two buyers is better than one — and the potential payoff for a buyer is huge. On the other, Biogen’s long-term growth depends on a relatively small amount of potential drug successes. You can bet that Merck and Allergan are looking very carefully at these factors as they consider making an offer.
Biogen shares fell $13.40 (-4.06%) to $316.71 in Wednesday afternoon trading. BIIB has gained 3.4% year-to-date, trailing the performance of the benchmark S&P 500, which has risen 5.5% in the same period.