Biogen’s effort to buy Sage against the board’s wishes and a long-time effort by investor Alcorn to scuttle Aurion’s IPO underscore the cutthroat nature of biopharma dealmaking.
Everyone in the biopharma industry has been calling for deals, deals and more deals. Well, they finally began arriving in the opening days of the J.P. Morgan Healthcare Conference earlier this month and lucky for us journalists, some of them are getting spicy.
I speak of course of Biogen’s attempt to buy long-time partner Sage Therapeutics in a deal valued at a mere $469 million. Earlier this week, Sage officially rejected the offer, saying that it significantly undervalued the neuroscience biotech and was not in the best interest of shareholders.
Separately, Sage has also sued Biogen alleging that the company and its CEO Chris Viehbacher breached a standstill agreement that called for any potential deal talks to occur in private.
Sage’s complaint filed Jan. 22 explains that the partners signed a stock purchase agreement on Nov. 27, 2020, which saw Biogen buy 10.7% of Sage’s stock. They agreed to develop drugs for central nervous system disorders, including now-approved Zurzuvae, splitting the profits and losses 50/50.
Importantly, the parties agreed at the time to a so-called standstill provision: Biogen could not make any proposals to buy Sage unless the discussions were initiated privately. This provision protected Sage and left the board with leverage to find the best possible outcome for shareholders if Biogen did pursue an offer.
Well, on Jan. 10, Biogen submitted a very public proposal to acquire Sage for $7.22 per share. The offer was disclosed in a Schedule 13D filing with the Securities and Exchange Commission. Head of Development Priya Singhal told BioSpace in an interview that the company was required to disclose the unsolicited bid. While Biogen didn’t issue a press release—and company executives did refuse to talk about the deal at the JPM meeting—it still became very public very quickly.
Sage argued in its complaint to the Delaware Chancery Court that Biogen has “clearly breached the standstill provision.” Moreover, Viehbacker commented on the proposal in an interview with STAT News, with the article describing the deal as a “lowball offer” and suggested that Biogen was trying to force Sage to sell at a “cut-rate price.” Ouch.
Sage went on to quote some of the analyst reaction to the offer in its complaint, including Baird analyst Brian Skorney who “compared it to a scene from The Godfather.” Again I say, ouch.
So while the industry was clamoring for deals, Sage would have preferred to have been left out for the time being. The company will now seek strategic alternatives to find a path forward that’s in the best interest of shareholders. This could end up in some sort of transaction, but Biogen will probably have to bring a bigger offer if they want to seal the deal.
If Biogen stays persistent, Sage could also execute what’s called a poison pill defense, selling additional shares at a discount to increase the number of shares that Biogen would have to buy up to complete the acquisition.
It’s a somewhat rare but not unheard of defense mechanism. Canadian biotech Zymeworks employed this back in 2022 to fend off an unsolicited buyout from private equity firm All Blue Capital. It also had to move its headquarters to Delaware, but was successful in fighting off the bid. It’s unclear if Biogen will want to fight that hard or if it will just walk away and look elsewhere. Singhal did tell BioSpace the company was not desperate to deal.
This is not the only pair of companies locking heads in the name of dealmaking right now. Alcon Research is trying to prevent a biotech it invested in called Aurion Biotech from going public. Alcon is Aurion’s largest shareholder, having supported its fundraising to the tune of $165 million. While many companies are clamoring to go public and prove that biotech has a place on Wall Street again, Alcon filed suit in October 2024 to prevent Aurion’s offering.
It’s a complex case involving voting rights and preferred stock, with Alcon making numerous attempts over the years to buy Aurion. Meanwhile, Aurion began exploring an IPO in 2023. Once official plans for an IPO were revealed in mid-2024, Alcon refused to back it, pledging to continue working on a deal. Alcon filed suit at the end of October 2024, alleging that Aurion needs its consent to pursue the IPO. Aurion of course countersued.
A split decision from the judge issued Jan. 27 cleared the way for the IPO. Alcon has pledged to appeal.
While I have seen unsolicited bids like the Biogen-Sage debacle before, I haven’t seen anyone fight this hard to prevent an IPO. These two episodes underscore the cutthroat environment of dealmaking and the lengths a company may go to seal a deal that not everyone wants.
