Now, I have no secret knowledge of an imminent deal between Celgene and Biogen. I want to make that clear for the sake of the high-frequency trading algorithms. But at a time when health-care investors seem especially primed for big, transformative biotech M&A, a deal in which Celgene acquires Biogen for -- let's call it $75 billion to $85 billion -- would be smart, profitable, opportunistic and certainly attention grabbing.
Here are five reasons for Celgene to buy Biogen:
1. Multiple sclerosis
Celgene would acquire an established multiple-sclerosis drug franchise -- Tecfidera, Avonex and Tysabri -- currently delivering more than $8 billion in sales annually. (That's as much revenue as Revlimid brings in today.) Granted, Biogen's core business isn't growing, and pricing pressure is and will remain an overhang -- but those MS drugs are still hugely profitable.
Most importantly, Celgene could use Biogen's MS franchise as a foundation to support the commercial launch of ozanimod, its own MS drug acquired through the Receptos deal. Ozanimod is going to be a blockbuster MS drug. Ozanimod's top-line phase III results are coming soon. Instead of tiptoeing into the MS market in 2018, Celgene could essentially dominate the field with four approved drugs, each with a different mechanism of action.
For two years straight, Celgene CEOs (Bob Hugin in 2016, Mark Alles in 2017) have walked around the J.P. Morgan Healthcare Conference telling investors about the company's intention to invest heavily in neuroscience, particularly drugs to treat neurodegenerative diseases.
Acquire Biogen and Celgene gets a headstart on that long-term strategic vision. Biogen is under a ton of investor pressure to make its research bets on neurodegenerative and neuromuscular diseases pay off right now because other growth options are limited. Celgene would have more breathing room.
Biogen is counting on the success of the Alzheimer's drug aducanumab -- in fact, the drug's ongoing phase III study is almost do or die for the company. But that wouldn't be so if Celgene owned aducanumab. If the drug works, then Celgene would have a new super-blockbuster drug to anchor its neuroscience push. But if aducanumab fails, investors wouldn't care much because Celgene's future doesn't depend on it.
Celgene isn't currently focused on developing drugs to treat rare disorders (known as "orphan diseases"), and may not have an interest in getting more involved in the future. However, acquire Biogen and Celgene gets Spinraza, the newly approved treatment for spinal muscular atrophy that most people believe will deliver $1 billion to $2 billion in peak sales.
The bulk of Celgene's revenues and profits come from the sale of small-molecule drugs like Revlimid. Biogen is more heavily involved in the development and manufacturing of biologics. Having a diverse bench of both small-molecule and biologic expertise would strengthen Celgene for the long term.
5. OpportunityThe best time to do a big M&A deal is when you don't have to do anything. Celgene's base business is growing nicely. The company's internal and external (partnered) R&D pipeline is deeper than that of any other large-cap biotech. So, why buy Biogen now? Because the combination would be truly transformative. Celgene would be become the dominant global biotech company, rivaling Big Pharma. Besides, Biogen's current shareholders would welcome a sale of the company.