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Why Is Biogen Attractive? Credit Suisse Sees 12-24% Upside Takeout Potential

Why Is Biogen Attractive? Credit Suisse Sees 12-24% Upside Takeout Potential - Biogen Idec Inc. NASDAQ:BIIB, Allergan, Inc. NYSE:AGN

According to reports on CNBC and the Wall Street Journal, several companies, including Allergan plc Ordinary Shares AGN and Merck & Co., Inc. MRK, have expressed an interest in acquiring Biogen Inc BIIB.

Credit Suisse’s Alethia Young maintained a Neutral rating on the company, with a price target of $322.

Potential Value

“Based on our M&A DCF for Biogen, we project potential values of ~$370/share to $410/share,” Young mentioned.

The analyst explained that the potential values were derived using the R&D, SG&A and tax rates for Allergan and Merck, although there still was uncertainty regarding whether a deal would actually occur.

Why Is Biogen Attractive?

Young believes that some of the pipeline and clinical expertise aspects that make Biogen attractive as an acquisition target include the company’s Alzheimer’s franchise, robust clinical infrastructure and expertise in Cambridge, the SMA platform and the multiple sclerosis base business.

“From a Biogen perspective, we think there are significant expenses that could be removed from their operating model: Biogen's MS sales force is more aligned by product, so we would guess some sales people could sell multiple products,” Young stated.

The analyst estimates that Allergan might reduce R&D and SG&A by 10 percent and 25 percent, respectively.

Young believes that Allergan is likely to benefit from Biogen’s science infrastructure.

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DateFirmActionFromTo
Aug 2016Raymond JamesMaintainsStrong Buy
Aug 2016Standpoint ResearchDowngradesBuyHold
Jul 2016Morgan StanleyMaintainsOverweight

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