Samsung Wants to Buy Biogen

Highlights

Samsung Group, if industry rumors are to be believed, is going to buy Biogen. The amount of the deal exceeds 50 trillion Korean won ($42 billion). Biogen’s stock price rose 13% on the news.

Biogen itself is said to have approached South Korea’s largest chaebol (business conglomerate) with a proposal to sell shares. The current market value of the U.S. biotechnology company is just under $35 billion. Back in July 2021, Biogen was valued at $62.4 billion.

If the parties agree, Samsung will join the world’s leading pharmaceutical manufacturers — Big Pharma.

 

Details

Biogen shareholders decided to sell the company because of perhaps insufficient growth in a business focused on drugs for neurological disorders such as multiple sclerosis, spinal muscular atrophy, and Alzheimer’s disease. So, while the company had revenues of $13.45 billion and $14.38 billion in 2018 and 2019, earnings in 2020 went to $13.45 billion. At the same time, it was able to collect $4.43 billion, $5.89 billion, and $4.00 billion in net income. As you can see, the volume ramp-up is slow, the more so the expectations for financial returns from 2021 are far from good: in the $10.8–10.9 billion revenue range.

Two-thirds of Biogen’s financial flow is generated by sales of multiple sclerosis drugs such as Tecfidera (dimethyl fumarate), Avonex (interferon beta-1a), Plegridy (peginterferon beta-1a), Tysabri (natalizumab), and Fampyra/Ampyra (fampridine/dalfampridine). But all is not well with their future.

Demand for Tecfidera is steadily declining in the face of less expensive generic copies. Vumerity (diroximel fumarate), an improved version of Tecfidera, is still too weak from a marketing standpoint to compensate for the patient outflow. Interest in interferon therapy for multiple sclerosis is predictably falling due to the availability of much more modern and powerful drugs like Roche’s Ocrevus (ocrelizumab); however, Biogen gets good royalties from its sales. Tysabri’s sales, still bringing in almost $2 billion, are stagnating overall. Fampyra/Ampyra is not coming out to decent financial numbers: clinically significant improvements in walking in patients with multiple sclerosis are very modest and do not appear in everyone.

The spinal muscular atrophy (SMA) direction, which in late 2016 first acquired the targeted drug Spinraza (nusinersen), is under pressure from two drugs: the gene therapy Zolgensma (onasemnogene abeparvovec), offered by Novartis, and the oral Evrysdi (risdiplam), behind which Roche stands.

Finally, Aduhelm (aducanumab) against Alzheimer’s, which had extraordinary hopes in terms of super profits, actually failed. First, Aduhelm’s inflated price of $56,000 for a one-year course of treatment for an American patient did not resonate well with health care providers. This was reflected in modest sales: in the third quarter of 2021, aducanumab earned $300,000, although it should, according to forecasts, have brought in $12 million. As a result, Biogen had to cut the price tag in half.

Second, the evidence base for aducanumab’s clinical benefit is too shaky to testify unequivocally about its effectiveness. That’s why neither Europe nor Japan is eager to approve Aduhelm, demanding more data to support its therapeutic strength.

In April 2011, Samsung entered the drug business by launching Samsung Biologics, a biotechnology division engaged in contract manufacturing (servicing the orders of third-party pharmaceutical companies).

In February 2012, Samsung Biologics and Biogen formed a joint venture, Samsung Bioepis, focusing its activities on the production of biosimilars (equivalent copies of branded biological drugs, but less expensive). During this time six biosimilars of original drugs were brought to market, such as Remicade (infliximab), Enbrel (etanercept), Humira (adalimumab), Herceptin (trastuzumab), Avastin (bevacizumab), and Lucentis (ranibizumab).

• The biosimilars run under the following names: Renflexis/Flixabi (infliximab), Eticovo/Benepali/Brenzys (etanercept), Hadlima/Imraldi/Adalloce (adalimumab), Ontruzant/Samfenet (trastuzumab), Aybintio/Onbevzi (bevacizumab), and Byooviz (ranibizumab).

• Samsung Bioepis prepares biosimilars of the following drugs: Soliris (eculizumab), Eylea (aflibercept), Prolia (denosumab), and Stelara (ustekinumab).

Although Samsung is known primarily for its brilliant Samsung Electronics business, dealing with consumer electronics, mobile devices, home appliances, and semiconductors, the management of the Suwon giant is confident that it can earn billions of dollars in the rapidly developing biologics market. Such drugs are quite complex to design and produce since they rely on living cells — as opposed to fairly simple, chemically synthesized ones. Again, the long-term growth prospects for mobile devices and semiconductors are becoming more and more doubtful: the market is already over-saturated.

In late August 2021, Samsung announced that it would invest 240 trillion won ($206 billion) over the next three years in its biologics, artificial intelligence, semiconductors, and robotics businesses.

 

Update

At the end of January 2022, Samsung Biologics agreed with Biogen to acquire the latter’s stake in the Samsung Bioepis joint venture. The Korean manufacturer will pay $2.3 billion for the 50% stake (minus one share).

The payment will be made in installments over the next two years, first $1 billion, then $812.5 million, and finally $437.5 million. Full ownership will take effect after Samsung Biologics makes the first $1 billion payment.

According to industry experts, the specified amount is an understatement because it is only a little more than the $2.24 billion that the equity stake owned by Biogen was valued by Samsung Biologics itself in 2018. Apparently, the deal’s poor pricing was influenced by the lack of other interested parties and the private nature of the acquisition.

There is an opinion that Biogen has kept a stake in Samsung Bioepis for too long already, although the biosimilars business has not brought in much. For example, in 2020 and 2021, Benepali (etanercept), Imraldi (adalimumab), and Flixabi (infliximab), earned $796 million and $831 million, representing 5.9% and 7.6% of Biogen’s total revenue. Perhaps the U.S. pharma company was waiting for Samsung Biologics to offer it half of the $10 billion that outside analysts valued Samsung Bioepis at.

In any case, the ongoing problems with Aduhelm have forced an urgent search for money that will be used to reorganize Biogen’s business, given the imminent need to diversify away from Alzheimer’s disease.

Samsung Biologics will raise 3 trillion won ($2.51 billion) in capital by issuing new shares. The funds will be used to finance strategic growth plans including the purchase of Samsung Bioepis stock.

At the same time, Samsung Biologics is considering new opportunities to develop its biopharmaceutical business in areas such as mRNA, cell therapy, and gene therapy, and is preparing to expand internationally.

Construction continues on a new production site (Plant 4), which will break Samsung Biologics’ own record for the world’s largest biologics production capacity. This year, construction will begin on a new Plant 5, which will offer multi-modal product services.