Biogen idec acquisition thesis november 30 2007 l.jpg
This presentation is the property of its rightful owner.
Sponsored Links
1 / 15

Biogen Idec Acquisition Thesis November 30, 2007 PowerPoint PPT Presentation


  • 103 Views
  • Uploaded on
  • Presentation posted in: General

Biogen Idec Acquisition Thesis November 30, 2007. Umesh Baheti (MBA) Jason Chen (MD) Akshay Dhiman (MBA) Huaping Tang (PhD). Market Trends. Pharma sector under rough weather Lack of blockbuster drugs through internal R&D Concerns surrounding drug safety and patents

Download Presentation

Biogen Idec Acquisition Thesis November 30, 2007

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Biogen idec acquisition thesis november 30 2007 l.jpg

Biogen Idec Acquisition ThesisNovember 30, 2007

Umesh Baheti (MBA)

Jason Chen (MD)

Akshay Dhiman (MBA)

Huaping Tang (PhD)


Market trends l.jpg

Market Trends

  • Pharma sector under rough weather

    • Lack of blockbuster drugs through internal R&D

    • Concerns surrounding drug safety and patents

    • Increased scrutiny by the FDA on new and existing products

    • FDA approvals to R&D dollars spent has declined

      • ($64Bn,13 approved compared to $27Bn, 24 approved in 1998)1

    • Increased competition from generics

    • Possibility of control on drug prices by new Administration could further erode industry profits

  • Pharma seeking new growth avenues

    • Increasing focus on niche areas

    • Alliances offer enhanced discovery capability through beefing up the pipeline and filling strategic gaps

  • Biotech valuation multiples higher than Pharma due to higher growth potential

  • Pressure on management to improve shareholder returns

    • Increased shareholder activism

1 Source: Economist Oct -2007

Yale Pharmaceutical Case Competition, 2007


Pfizer under pressure l.jpg

Source: Capital IQ as of 11/28/07

Source: Pfizer

Pfizer under pressure!

  • Pfizer’s lackluster financial performance

    • Pfizer’s stock has been the worst performer in its peer group1 over the last 5 years

    • Pfizer stock trading at a substantial discount to peer group1 – P/E of 10.8x (median P/E of 19.3x)

    • High potential Exubera taken off market in 3Q ’07; write-off of $2.8Bn

    • Lipitor under competitive pressure from generics (Lipitor 3Q ’07 revenues 5% lower than ’06)

    • 80% decline in YTD ‘07 Zoloft revenue compared to ’06

    • ~ $12Bn of revenue loss due to 5 patent expiration

  • Low ROI from R&D

    • Increasing R&D costs (>$8Bn)

    • Limited business development success across therapeutic categories and development stages

    • No major blockbuster expected

1 Peer group includes Astra Zeneca, Merck, Novartis, Wyeth, El Lilly, Glaxo Smithkline, Abott Laboratories


Pfizer s rationale for acquisition l.jpg

Pfizer’s rationale for acquisition

Strategic

  • Diversify portfolio of therapeutic areas

  • Improve presence in biologics

  • Shore up product pipeline

  • Access to biotech R&D capability

  • Industry undergoing shift

Financial

  • Biogen is up for sale

  • Opportunity to deploy surplus cash

  • Sizeable market potential (350-500K patients annually)

  • Biogen’s pipeline complement’s Pfizer’s strategic priority to enhance revenue both in the short and the long term

Yale Pharmaceutical Case Competition, 2007


Acquisition evaluation l.jpg

Benefits

Access to Biogen’s pipeline

Product Diversification

Access to Avonex and BG-12

Access to Biogen’s R&D resources

Knowledge diffusion into Pfizer’s existing R&D

Access to niche and profitable MS market

Financial

Higher valuation multiples due to biotech slant

Higher gross margins on biotech

Synergies

Technology

Leverage Pfizer’s global sales and distribution capability

Risks

Organizational

Divert attention from internal rationalization

Different R&D cultures and priorities; R&D diseconomies of scale

Limited cost synergies:

Geographically diverse locations

Transaction Uncertainty

Complications due to CoC provisions

Rituxan may not end up with Pfizer

Risk of overpay due to higher valuation

Liability

Efficacy and safety of Tysabri

Revenue Erosion

Flagship product Avonex under threat from generic substitution and competition

Timeline may not match

Acquisition Evaluation

Yale Pharmaceutical Case Competition, 2007


Ms mechanism and treatments l.jpg

MS mechanism and treatments

Source: Kieseier BC et al. CNS drugs, 2007;21(6):483-502

Yale Pharmaceutical Case Competition, 2007


Comparison of existing ms drugs l.jpg

Comparison of existing MS drugs

Yale Pharmaceutical Case Competition, 2007

Source: www.uptodateonline.com


Slide8 l.jpg

Comparison of MS drugs in Phase III

Legend: Biogen drugs / Competitors’ drugs

Yale Pharmaceutical Case Competition, 2007


Valuation assumptions l.jpg

Valuation Assumptions

Sum of the parts analysis:

  • 3.0-4.0x multiple on ’10 expected revenues to value each drug (based on precedent biotech acquisitions)

  • Pipeline valuation: Values Ph III drugs @ $100M; Ph II/III @ $50M; Ph II @ $25M; Ph I @ $15M and Pre-clinical @ $5M

  • Facilities Valuation: Values production facility in NC and Denmark @ $400M (based on precedent transactions)

    Discounted Cash Flow (DCF) analysis:

  • Enterprise value calculated for Biogen’s worldwide operations

  • 13% WACC (given)

  • Terminal value calculated using 5-8% perpetuity growth rate

    Trading Multiples:

  • TEV/EBITDA and TEV/Sales multiples used

  • Peer group comprises of Abott Laboratories, Astra Zeneca, Glaxo SmithKline plc, Merck & Co. Inc., Novartis AG, Eli Lilly & Co., Sanofi-Aventis AG and Wyeth

Yale Pharmaceutical Case Competition, 2007


Valuation summary l.jpg

Implied Enterprise value ($ Bn)

20.3 – 30.2

14.7 – 28.3

9.4 – 34.9

18.8 – 27.8

Valuation Summary

1

1 Source: HSBC Equity research

Accretion – Dilution analysis

  • Offer price of $78/share (30% premium to pre Biogen seeking buyout)

  • All cash offer likely to have adverse impact of Pfizer’s credit ratings

  • Considering most likely scenario (50-50 case), merger becomes accretive in ’10

  • Assumed $300MM annual synergies

Yale Pharmaceutical Case Competition, 2007


Strategic alternatives key considerations l.jpg

Strategic alternatives & key considerations

  • Recommendation in rank order

    • Acquisition makes strategic sense if price between $72 -$85

    • Build expertise in biotech through partnerships

    • Seek other acquisitions in the biotech space

Yale Pharmaceutical Case Competition, 2007


Appendix l.jpg

Appendix


  • Login