Reata Pharmaceuticals: Biogen's $7.3B deal for Reata came after outbidding mysterious 'Party A'

Biogen's $7.3 billion acquisition of Reata Pharmaceuticals - its first major deal in more than four years - came after a showdown with another potential buyer that saw the acquisition price pushed up from $140 a share to $172.50, according to a securities filing. The deal, announced just over a month after Biogen's first approach, appears to be a sign of the increased flexibility that CEO Chris Viehbacher has with the company's new board. For years, Biogen has kept out of the M&A market, and its last major takeover was the disastrous 2019 buyout of Nightstar Therapeutics. But on June 24, less than two weeks after the announcement of changes to Biogen's governance - including a new chair and the departure of three longtime directors - Viehbacher reached out to Reata, according to the SEC filing. That led to a dinner the next month in Dallas with Viehbacher and his newly-installed head of corporate development Adam Keeney, Reata's chairman and CEO Warren Huff, and its president, COO and CFO, Manmeet Soni. On July 14, the day after the dinner, Biogen made a first offer of $150 a share. But an unnamed "Party A" had already bid $140, and then $147. Bio­gen makes its move, an­nounc­ing a $7.3B deal for Rea­ta After the Biogen offer, Reata told Party A that another bidder had entered the picture. Its board then also rejected Biogen's offer as too low, and quickly did the same to a $155 follow-up offer from Party A. Reata had reason to be confident: It had just won FDA approval for its drug to treat the rare disease Friedreich's ataxia on Feb. 28. And commercialization of the drug, known as Skyclarys, was going well, according to the filing. While the filing doesn't identify Party A, there are hints that the unnamed company has a strong presence in Europe. The filing mentions Party A's European market presence and a potential collaboration there. Reata declined to comment on the other party's identity. Closing the deal A few days later, on July 21, Biogen made a substantial raise. It told Reata it would be willing to pay $172.50 per share in cash, a $22.50 increase over its first offer. The next day, Reata's board determined the valuation was in the "zip code" of what it wanted, but not quite there. Reata's board determined it didn't want to contact third parties to inquire about deal interest, because they didn't think it would result in a more valuable proposal. Plus, Reata's board didn't want leaks, which could impact the "competitive dynamics that had emerged between Biogen and Company A." Biogen and Party A wound up sending in revisions to their offers, with Biogen's price staying the same but with a lower termination fee for Reata, among other adjustments. Party A raised its offer to $172 per share, a big increase to their original proposal. The board talked on July 27 and determined the higher offer from Biogen was the one to go with, and they were also informed that a news story about a possible deal was likely to come out by the next day. On July 28, Reata and Biogen finalized the merger agreement and that same morning, prior to the opening bell, put out their press releases. A few weeks later, Reata revealed higher-than-expected revenue figures for Skyclarys. The biotech recorded $20 million in Q2 revenue for the first FDA-approved treatment for Friedreich's ataxia. "We believe this justifies Biogen's $7.3B acquisition of Reata," TD Cowen analyst Tyler Van Buren wrote in a note on Aug. 8, "and consensus ests will have to be revised sharply upward." He revised his full-year estimate from $60 million to a "conservative" $75 million.