Why Alexion's Gain In the C-Suite Doesn't Bode Well For Biogen Takeout Prospects

Biogen Inc. (BIIB) has been buzzed about as a potential takeover target but the upcoming departure of chief financial officer Paul Clancy signals that a sale of the biotech firm isn't imminent, according to Mizuho Securities USA LLC analyst Salim Syed.

"If I had to guess, probably there's nothing imminent on the table in terms of the company being bought out," Syed said in a Wednesday, June 14, interview. "It would be abnormal for a CFO to leave if the company were in the middle of being bought."

Clancy, who has served as Biogen's finance chief since 2007 and has spent a total of more than 16 years at the Cambridge, Mass.-based firm, is leaving to join Alexion Pharmaceuticals Inc. (ALXN) .

In July of last year, on the heels of Biogen's second-quarter earnings call, TheStreet reported that analysts were viewing Biogen as both a potential buyer and takeover target. In August, the Wall Street Journal reported that Biogen has attracted interest from companies including Merck & Co. (MRK) and Allergan plc (AGN) . Then in December, when Biogen named Michel Vounatsos as the company's new CEO, Reuters reported that the selection of Vounatsos "likely keeps the U.S. biotech in play as a takeover target."

As for potential acquisitions by Biogen, Syed said Clancy's departure probably doesn't change anything in terms of which companies they're looking at buying.

Biogen's acquisitions during Clancy's tenure as CFO include the purchase of Convergence Pharmaceuticals for up to $675 million in 2015 and Stromedix Inc. for up to $562.5 million in 2012. Among its more recent deals was the asset purchase, completed in May, of Remedy Pharmaceuticals' Phase 3 candidate, Cirara, for an upfront payment of $120 million and potential milestone payments and royalties.

Also during Clancy's tenure, Biogen spun off its hemophilia business, now called Bioverativ Inc. (BIVVV), in January.

Clancy, who will remain at Biogen through the second quarter, joined the company in 2001 and has held roles including vice president of business planning, portfolio management and U.S. marketing, and senior vice president of finance. Previously, he was at PepsiCo Inc. (PEP) for 13 years.

In the first quarter of 2017, Biogen reported adjusted net income of $1.1 billion, or diluted earnings per share of $5.20. That compares to adjusted net income of $1.05 billion, or $4.79 per share, in the first quarter of 2016. Revenue rose 3% year-over-year to $2.8 billion.

Clancy's departure shouldn't rattle investors, Syed said.

"Paul Clancy is an extremely high integrity individual," Syed said. "It would be completely anathema for him to leave the company in a state of mess."

He went on to describe Clancy as a good manager of P&L. Syed noted while that there have been hiccups in the past --  he pointed to the instance when Biogen cut its full-year 2015 revenue guidance -- Clancy generally guides conservatively and the company either meets or beats their original guidance.

Syed also thinks Clancy's move has nothing to do with the release of data for Alzheimer's drug aducanumab, which could take place in end-2019 or early 2020. "It's still too far away for anyone to really know how that drug is doing. I don't think that's why Paul is leaving company," he said.

For the next CFO, however, the upcoming drug data could be part of the attraction of joining Biogen because the asset has the potential to be transformative to the company, Syed said.

He thinks Clancy's departure was due to a career opportunity and not because something is so incredibly wrong at Biogen. "You don't get many opportunities to go from one large cap biotech to another," Syed noted.

At New Haven, Conn.-based Alexion, Clancy will succeed Dave Anderson, who said in May he was planning to leave the company at the end of August. Clancy will start at Alexion on July 10 and assume the CFO post on July 31.

Shares of Biogen closed at $253.37 on June 14, down 3.1%, and Alexion shares finished the trading session at $118, up 9.3%.

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