Biogen Announces $7.3 Billion Acquisition After Outlining Plans To Cut 11% Of Workforce

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Biogen (BIIB) announced Friday it has agreed to acquire Reata Pharmaceuticals (RETA) for about $7.3 billion, boosting biopharmaceutical company Biogen’s drug offerings for serious neurological diseases. Reata stock surged early as Biogen stock slid.

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RETA stock skyrocketed 52.4% to 165.24 early Friday during market trade after Biogen reported it plans to pay $172.50 per share in cash for Reata. The price tag on Reata is about 59% above its Thursday closing price of 108.55.

Meanwhile, Biogen stock fell 0.6% to 261.15 Friday. The acquisition news from Biogen comes after the company on Tuesday said it planned to cut about 1,000 jobs in an effort to reduce operating expenses.

Earlier in 2023, the Food and Drug Administration approved Reata’s Skyclarys. The drug is the first U.S. treatment for the genetic disorder Friedreich’s ataxia.

Skyclarys also is currently being reviewed in the European Union. Friedreich’s ataxia is an ultrarare, genetic, life-shortening and degenerative neuromuscular disorder.

“Skyclarys is an excellent complement to our global portfolio of treatments for neuromuscular and rare disease,” Biogen Chief Executive Christopher Viehbacher said in a written statement.

Biogen Stock: M&A And Staff Reductions

The Biogen chief told analysts in a call Friday morning that with the acquisition, Biogen now has its Alzheimer’s drug, Leqembi, and Skyclarys both fully approved in the U.S.

“This places Biogen in an outstanding position for growth going forward,” Viehbacher said.

The Cambridge, Mass.-based biotech said it plans to fund the deal to purchase Reata with cash on hand. It also will be supplemented by the issuance of term debt. Biogen expects the purchase to be completed by the end of 2023.

On Tuesday, Biogen reported better-than-expected second-quarter financials, as earnings fell more than 20% with Leqembi not yet profitable.

‘Re-engineering’ The Company

Biogen also outlined plans to cut around 11% of its workforce. It hopes to help reduce annual operating expenses by $1 billion by 2025.

Biogen had 8,725 employees at the end of 2022. On Friday, Viehbacher told Biogen stock analysts there is a need for “re-engineering” the company. Further, he said a key was in “removing layers in the organization.”

“I didn’t really want to do an acquisition too early until we actually had a plan for the internal organization,” he said.

Viehbacher believes Biogen will have implemented most of its restructuring in the U.S. by the time the deal with Reata closes.

“This is actually going to be pretty synergistic,” he added.

Biogen Second-Quarter Results

The biotech firm saw second-quarter profits slip 23% to $4.02 per share while revenue dropped 5% to $2.45 billion. Wall Street expected earnings to fall 28% to $3.77 a share, with sales decreasing 9% to $2.36 billion.

The company plans to invest about $300 million in new product launches, and remaining research and development programs.

Biogen stock has a 34 Composite Rating out of a best-possible 99. Shares also have a 31 Relative Strength Rating, and a 33 EPS Rating.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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