Biogen (BIIB) Could Be Worth $375-475/Share in a Takeover - RBC Capital's Yee

Biogen (NASDAQ: BIIB) could be worth $375-$475/share in a takeover RBC Capital's Michael Yee said following reports from the WSJ the company has attracted takeover interest from Merck (NYSE: MRK) and Allergan (NYSE: MRK)

Yee said today's report: (1) this is consistent with our recent prior notes that BIIB is in theory "vulnerable" to a takeout because of its recent share price over the last year, (2) the fact that there is no formal CEO in place given resignation of Scangos, (3) undervalued long-term base business and importantly - huge pipeline including SMN-Rx (positive data recently) and most promising Alzheimer's drug in Phase III, and other neuro assets, (4) long-term tail-value of Rituxan/Gazyva profit share and Ocrelizumab royalties.

In addition, it reinforces the firm's view that large cap biotech may have gotten too cheap and big pharma companies are ready and poised to do more deals. This is positive for Celgene (NASDAQ: CELG), Biomarin (NASDAQ: BMRN), Vertex (NASDAQ: VRTX), etc.

Commenting on valuation in a takeover, Yee highlighted: "(1) Our bull case with "probability based" pipeline adjustment has BIIB at $375 including 50% on Alzheimer's and 25% on SMN-Rx for now, (2) if we wiped out 50% of the OPEX at BIIB - we get closer to $400 and higher as opex would be synergized under a larger company..... this is 20x 2016E earnings and not dissimilar from other large M&A deals (see our M&A comp sheet)....(3) we can get as high as $475 if we start pricing in 100% probabilities on Alzheimer's (with discount rates) or using a 25x multiple on forward earnings."

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