Biogen agreed to buy biotech firm Reata Pharmaceuticals for nearly $6.5 billion to bolster its position in the rare disease drugs market while its older multiple sclerosis drugs face intense competition.
Through the deal, Biogen said it will gain Plano, Texas-based Reata's recently approved drug Skyclarys to treat a rare genetic disorder that causes progressive damage to the nervous system.
Biogen has said it has been hunting for deals, especially in areas such as rare diseases and immunology, to expand beyond its multiple sclerosis drugs portfolio, which is under pressure from competition.
"We believe Biogen has the foundation in place to accelerate the delivery of Skyclarys to patients around the world," Biogen CEO Christopher Viehbacher said in a statement.
While investor hopes are pinned on the Alzheimer's drug Leqembi, sold with partner Eisai, Biogen has been seeking to complement its portfolio with drugs that boost its near-term growth under new CEO Viehbacher.
Leqembi gained U.S. approval earlier this month, clearing the way for wider insurance coverage, but Biogen has said it expects costs related to the drug's launch to offset modest sales this year.
"We've thought that Reata is one of the few logical takeover targets for Biogen," said Stifel analyst Paul Matteis, adding that the deal meets Biogen's objective of near-term sales growth.
Reata's Skyclarys is the only approved treatment for Friedreich's ataxia, which affects about one in every 50,000 people, in the United States.
Biogen already makes Spinraza, a treatment for rare muscle-wasting disorder spinal muscular atrophy, and a treatment for a rare type of amyotrophic lateral sclerosis.
The company will pay $172.50 per share in cash, which represents a 58.9% premium to Reata's last closing price.
Its shares surged over 50% to $164.50 in premarket trading, while Biogen's shares were down marginally.
Including debt, the deal values Reata at roughly $7.3 billion.