Analysts Laud Biogen's M&A Strategy Following Deal to Buy Gene Therapy Company Nightstar

Biogen Inc BIIB announced Monday a deal to buy gene therapy biotech Nightstar Therapeutics PLC NITE for $800 million.

The Analysts

• Baird analyst Brian Skorney maintained a Neutral rating on Biogen with a $348 price target.
• H.C. Wainwright analyst Andrew Fein reiterated a Buy rating and $363 price target.
• Bank of America Merrill Lynch analyst Ying Huang maintained a Buy rating and $400 price target.

Baird: Biogen Could Be Both Buyer, Acquisition Target 

The addition of Nightstar's two late-stage gene therapy assets that are being evaluated for choroideremia and X-linked retinitis pigmentosa, respectively, should help Biogen diversify its pipeline, Skorney said in a Monday note.

"In addition to Nightstar's two late-phase clinical programs, Biogen will gain Nightstar's preclinical assets in Stargardt disease, Best disease, and retinitis pigmentosa," the analyst said. 

Biogen's multiple sclerosis franchise is stable and delivering strong cash flow, Skorney said. The analyst expects Biogen's spinal muscular atrophy blockbuster drug Spinraza to continue to deliver revenue growth in the forseeable future.

Baird sees Biogen both as a potential acquirer as well as M&A target, given its sector low PE multiple and its MS and SMA franchises.

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HC Wainwright Likes Both Late-Stage Assets, Indications

The Nightstar deal is an easy bolt-on for Biogen that provides an opening into both gene therapy and ophthalmology, Fein said in a Tuesday note. Nightstar's two late-stage assets could reach commercialization in 2 1/2 to three years, the analyst said.

Top-line results from the late-stage study in choroideremia are due in the second half of 2020.

The analyst estimates the market potential for the pipeline asset for choroideremia to be north of $1 billion.

"Our PT of $363/share is based on a discounted cash flow analysis using a 10-percent discount rate and 2-percent growth rate, in line with the expected discount and growth parameters of a commercial multiproduct biotechnology company." 

BofA: Biogen Could Close More Deals

The ophthalmology gene therapy acquisition announced Monday is in line with BofA's expectations, especially after Biogen's previous failed partnership with Applied Genetic Technologies Corp AGTC, Huang said in a Monday note. 

The analyst expects Biogen to complete more small-to-mid sized M&A deals in order to reduce its upcoming binary risk in 2020.

"We maintain our Buy rating, as we believe the acquisition of NST diversifies BIIB's pipeline and fits well with its current portfolio," Huang said. 

The Price Action

Biogen shares were up 0.58 percent at $329.16 at the time of publication Tuesday, while Nightstar shares were trading slightly higher at $25.20. 

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