Jefferies says Nice Deal with - Adds More Phase III Blockbuster
Programs to Pipeline
BIIB adds late-stage Phase III blockbuster pot'l programs from SAGE in
two acute neuro indications for depression that we think have high
probability of success with data in 2021. We like this deal particularly
because they paid an upfront and partnered it to bring it in rather
than full-out acquiring it in front of very binary data in 2021. Hence -
they get the milk without having buy the whole cow....
Big picture: The key driver for BIIB obviously remains the FDA decision
for aducanumab for Alzheimer's in the near future and we remain
optimistic the FDA could still approve the drug due to totality of
evidence, agreements on a label and REMS, and the fact that many of our
KOLs said it is reasonable to approve and it would not be surprising
(and it would "run its course" meaning if it's great, it will get used,
if it's not, it won't get used much long-term and other Alzheimer's drug
would come in the future). Hence, significant upside from here vs
downside - particularly since our sense is the buyside thinks 75%-80%
probability it will get rejected. We don't make any read-through to
doing this deal given recent Adu panel vote given this deal looks good
We like this type of deal: Regardless of what happens in Alzheimer's -
BIIB is continuing to build the late-stage pipeline - and this actually
provides some backstop for BIIB stock if Alzheimer's sends the stock
down. We have been calling on them to do this and they're doing it
without full out paying up big for acquisitions. For example -- Street
wanted BIIB to acquire SAGE 1-2 years ago when stock was $150-200 (every
investor was asking if BIIB would do acute psychiatry deals)...and the
Phase III MDD study actually didn't work!
That would have been a big problem for BIIB. Now two years later, they
pay $1.5B instead and when SAGE stock is much lower at $82/share and
they wisely get the (split) rights to SAGE's depression portfolio if it
works in 2021 and they didn't have to full out acquire it for what would
probably have been $8-10B+....this also follows the BIIB/DNLI deal
recently to bring in Phase III-ready LRRK2 oral Parkinson's drug as well
without having to acquire all of DNLI.
SAGE Phase III assets should have reasonably high probability of success for BIIB
investors in 2021 - could be a big year for BIIB if cards fall right.
SAGE has what could be a $2-5B type depression franchise in post-partum
depression (PPD) and major depression disorder (MDD). SAGE has improved
on the design of the Phase III MDD and given higher dose, trial
enhancements (evening dose, closer to meals) etc, we think there's a
high 50%-65% PoS it works in 2021 for BIIB investors.
Details of the agreement: SAGE to receive $1.5B
in cash ($875M upfront cash + $650M equity via 6M newly issued shares at
$104). SAGE is also eligible to receive up to $1.6B in potential
milestone payments regarding zuranolone and SAGE-324. BIIB and SAGE to
share US developmental costs and economics (50/50) while BIIB would be
responsible for commercialization OUS (ex-Japan, Taiwan, and South
Korea) and to pay SAGE "high teens to low twenties" royalty. SAGE and
BIIB will hold calls on Nov 30 at 8AM and 9AM EST, respectively.