Biogen: Reata Acquisition Adds to Neurology Portfolio at Lower Risk but High Price

We’re lowering our Biogen fair value estimate to $327 per share from $340 following the announced pending acquisition of rare neurology drug firm Reata Pharmaceuticals for $7.3 billion. Reata recently gained Food and Drug Administration approval of Skyclarys for Friedreich ataxia, a rare genetic neuromuscular disorder, in the United States and expects to expand the launch to Europe in 2024. We think Reata fits well with Biogen’s strategy of expanding in rare diseases to support its wide moat, following Biogen’s successful global launch of spinal muscular atrophy drug Spinraza and the recent launch of amyotrophic lateral sclerosis drug Qalsody. Reata's pipeline drug cemdomespib is also entering phase 2 development for diabetic neuropathic pain, although given limited data, we do not assign the drug value in our Biogen model.