Biogen Spinning Off Hemophilia Business As Competition Heats Up

Big biotech Biogen (BIIB) said Tuesday that it will spin off its hemophilia business into an independent company in a move much anticipated by Wall Street.

Biogen, which focuses mainly on neurological diseases, got into hemophilia with the 2014 launch of its two long-acting infusion treatments, Eloctate and Alprolix, for hemophilia A and B, respectively. It carved out some market share from leader Baxter International (BAX), but in mid-April press reports relayed rumors that Biogen was thinking of selling or spinning off the business.

Baxter had already made a similar move when it spun off its hemophilia-focused biopharma arm as Baxalta (BXLT) last July. Baxalta was quickly snapped up by Shire (SHPG) in a $32 billion deal.

Both Baxalta’s and Biogen’s infusion therapies are under potential threat from new gene therapies that might be able to cure the disease with a one-time treatment, or at least manage it with far fewer treatments. BioMarin Pharmaceutical‘s (BMRN) early-stage trial results for its hemophilia gene therapy, reported last month, supported the method’s potential.

Biogen’s press release mentioned that investment in research was one rationale for the spinoff.

“The new company, to be named at a later date, will focus on the discovery and development of therapies for the treatment of hemophilia,” said the release. “The new company plans to bring longer-acting therapies utilizing the XTEN technology into clinical development in the first half of 2017 and to accelerate the development of bispecific antibodies and hemophilia-related gene therapy programs.”

It added that the spinoff will also enable the remaining portion of Biogen to focus on its core multiple-sclerosis business, which has been struggling lately as shown in Biogen’s Q1 earnings last month.

Still, RBC Capital Markets analyst Michael Yee found the decision a bit puzzling.

“Why would Biogen want to remove a growing and profitable, long-IP-duration biologics business that diversifies Biogen and ‘dilutes’ the EPS when it’s removed?” he asked in a research note. “In addition, Biogen is not selling the business and bringing in cash (approximate $4 billion to $6 billion valuation), and prior to today, the question was what would they do with that cash and who would they buy (they aren’t getting cash in this deal). So this seems odd and perhaps implies the valuation is not what the Street perceives if a buyer was not willing to pay up.”

Biogen stock was up a fraction in early trading on the stock market today, near 275. The stock has found support above its 50-day line.

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