What's Biogen Worth?

• Citibank's Werber is one of those analysts with a hold on Biogen. He initiated covered on the company last month with a $74 price target. Werber's sum-of-the-parts analysis pegged Biogen's valuation at $70 per share. Tacking on a $15-per-share premium suggests a takeout price of $85 per share. (Citibank has a banking relationship with Biogen.)

  Bear Stearns biotech analyst Mark Schoenebaum has performed a similar analysis that pegs Biogen value in the mid-$60s per share. Adding in a takeout premium and cost synergies that come out of an acquisition pushes his projected purchase price into the $70 range. If Tysabri can achieve peak annual sales of $3 billion or more, Schoenebaum says a takeout price for Biogen in the $80 range isn't out of the question. (He as a "peer perform" rating on Biogen, or the equivalent of a hold, and his firm has a banking relationship with the company.)

• As noted above, the multiple-sclerosis drug Tysabri is the key to any potential Biogen acquisition. Biogen's forecast calls for 100,000 Tysabri patients by the end of 2010. That equates roughly to $2 billion to $3 billion in revenue. Today, there are approximately 17,000 multiple-sclerosis patients on Tysabri.

  Whether Biogen and its partner Elan can meet its ambitious Tysabri forecast remains to be seen, but so far, analysts appear skeptical. Analyst estimates for 2010 Tysabri sales ranges from $700 million to $1.6 billion, according to Citibank's Werber.

  If Tysabri sales do fall short, it won't be the first time that a biotech drug at the center of a takeout story disappointed.

  Back in 2001, Amgen(AMGN) CEO Kevin Sharer justified a $16 billion acquisition of Seattle-based biotech firm Immunex by predicting that Enbrel, the rheumatoid arthritis blockbuster and the jewel in Immunex's crown, would grow to more than $3 billion in 2005 from about $1 billion in sales in 2001.

  It turns out that Sharer's prediction was two years off. Enbrel isn't expected to reach $3 billion in annual sales until this year.

  Enbrel didn't meet Amgen's initial expectations in part because of competition from other anti-inflammatory drugs. Tysabri could also face similar competition from multiple-sclerosis drugs in mid- to late-stage clinical trials, including drugs from Novartis(NVS) and Genentech(DNA).

• I already discussed the AztraZeneca-Medimmune deal as a potential sales comp for a Biogen acquisition, but what about the Amgen-Immunex deal? Well, it turns out that Amgen's $16 billion purchase in December 2001 came at a 20% premium to Immunex's stock price at the time. Amgen paid about 16 times sales for Immunex.

>To order reprints of this article, click here: Reprints