BioGen bonds widen again after stock buyback plans

2 min read
Americas
William Hoffman

Bonds of biotech company BioGen came under further pressure on Monday after the company said it would buy back US$5bn of shares.

The bonds have already widened significantly over the past few sessions after the company ended trials of experimental Alzheimer’s disease drug aducanumab - a blow to Biogen’s efforts to monetize its clinical development program, analysts said.

The stock buyback, announced Monday, helped curb the slump in its stock, which sank more than 30% after the trials were shelved last week.

But it did little to help the company’s bonds.

BioGen’s 5.2% 2045 tranche was the most heavily traded of the company’s bonds on Monday, according to MarketAxess. It was seen 5bp wider at G+213bp, having traded around 176bp before the drug trials were scrapped.

Biogen, rated Baa1/A-, did not provide details of how it would finance the buyback.

The US$5bn share buyback is in addition to the approximately US$1.7bn remaining under the stock repurchase program authorized by its board in August 2018, the company said in a regulatory filing.

Analysts last week raised concerns that Biogen may now look to lever up through M&A in order to diversify its drugs pipeline. Still, CreditSights analysts said Biogen’s net leverage is relatively low at under one times earnings.

Share repurchases among S&P 500 companies rose 62.8% year-over-year in the fourth quarter for a total amount of US$223bn, S&P said in a report out Monday. That marked the fourth straight record-setting quarter, the rating agency said.

S&P 500 companies spent a record US$806.4bn in all of 2018, which shattered the previous record of US$589.1bn in 2007. Sharebuybacks were among the most prevalent in the healthcare sector, S&P said.

One investor said M&A risk could make healthcare less appealing.

“Healthcare is viewed defensively but it could lose some of that shine over the next 12-18 months,” said the investor.

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