Biogen, a leading biotech company headquartered in Cambridge, Massachusetts, made headlines recently with its announcement to acquire Reata Pharmaceuticals for $7.3 billion. This bold move is set to significantly bolster Biogen's portfolio of neurological disease drugs and position it for growth in the future.
The acquisition sent shockwaves through the market, leading to a remarkable 54% surge in Reata's stock (RETA) to $167.19 per share recently, a staggering 59% increase from its previous closing price of $108.55.
Biogen's stock (BIIB) also experienced a positive boost, rising 0.9% to $265.23 on the same day of the announcement. The acquisition came shortly after Biogen's decision to eliminate 1,000 positions in an effort to optimize operational efficiency and cut operating costs.
Reata Pharmaceuticals' Skyclarys, a breakthrough medicine for the treatment of Friedreich's ataxia, received FDA approval earlier in the year, marking a significant milestone for the company. The drug addresses an ultra-rare genetic, life-shortening, degenerative neuromuscular condition, and its potential to make a profound impact on patient lives has drawn Biogen's attention.
Biogen's CEO, Christopher Viehbacher, expressed his excitement about the deal, noting that Skyclarys and Biogen's Alzheimer's drugs, including Leqembi, would receive U.S. approval, placing the company in an excellent position for future growth.
The acquisition of Reata will be primarily funded through cash, supplemented by the issuance of term debt, and is expected to be completed by 2023. Biogen's sound financial standing and successful second-quarter earnings, surpassing Wall Street expectations, further reinforce the company's position to undertake this transformative move.
To align with the acquisition, Biogen is implementing a strategic reorganization plan aimed at streamlining operations. The plan aims to reduce approximately 11% of the company's personnel, with the goal of achieving $1 billion in cost savings by 2025. Viehbacher emphasized the importance of optimizing the internal organization before proceeding with the acquisition, signaling a thoughtful and calculated approach to the consolidation.
Despite facing a 23% decline in second-quarter profits to $4.02 per share and a 5% drop in revenue to $2.45 billion, Biogen remains confident in its growth strategy. The company's commitment to research and development, with $300 million allocated for new product releases and innovation, further indicates its dedication to expanding its portfolio and market presence.
The acquisition of Reata Pharmaceuticals represents a pivotal moment for Biogen, solidifying its position as a leader in the neurology and rare disease treatment spaces. With Skyclarys' FDA approval and pending EU assessment, Biogen's CEO anticipates a synergistic impact that will drive innovation, open new markets, and ultimately improve patient outcomes.