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Here’s Why Investors Weren’t Excited About Biogen’s New CEO

Dec 20, 2016

Biogen, the U.S. drug maker focused on neurological, autoimmune and rare diseases, said on Monday it had appointed its chief commercial officer, Michel Vounatsos, as chief executive officer, ending a five-month search.

Biogen shares fell on the news of his appointment, which is effective as of Jan. 6. Vounatsos succeeds CEO George Scangos, who announced last July he would retire after leading the company since 2010.

Cambridge, Massachusetts-based Biogen (biib), which has been trying to develop its promising spinal muscular atrophy and Alzheimer's disease drugs, attracted some takeover interest earlier this year, although it is not pursuing a sale.

Biogen shares dropped as much as 4.6% after Reuters first reported Vounatsos' appointment on Monday, and ended trading in New York down 2.7% at $278.77, giving the company a market capitalization of $60.7 billion.

RBC Capital Markets analyst Michael Yee wrote in a note that Biogen shares slid because investors saw the appointment as making a near-term acquisition of Biogen less likely. "The Street has simply not yet had enough time to get familiar with Vounatsos," the RBC analysts wrote.

Vounatsos joined Biogen earlier this year after a 20-year career at rival pharmaceutical company Merck (mrk), where he held leadership positions across Europe and in China.

In his role as executive vice president and chief commercial officer at Biogen, Vounatsos' responsibilities included overseeing the growth of Biogen's product portfolio and supporting the development of new drugs.

His CEO appointment is a sign that Biogen is placing a new emphasis on boosting its pipeline. The vast majority of the company's more than $10.8 billion in 2015 sales came from its multiple sclerosis franchise, which includes the hugely successful drug Tecfidera.

Sales of MS drugs are expected to take a hit in the coming years as cheaper generic competitors come on the market.

That has increased investor scrutiny of Biogen's Alzheimer's treatment, aducanumab, which is under a late-stage clinical trial that could establish it as a breakthrough treatment for the memory-wasting disease. The market for Alzheimer's treatments could exceed $13 billion by 2023, according to healthcare information company GlobalData.

However, disappointing recent data from rival Eli Lilly (lly), which had been working on a similar treatment, raised questions about the scientific theory underlying both companies' planned treatments.

Biogen has also been working on another potential blockbuster drug, known as Spinraza, which could become the first FDA-approved treatment for spinal muscular atrophy, the leading genetic cause of death in infants.

"We intend to gain approval for Spinraza, to provide the first treatment for spinal muscular atrophy, continue to grow our global multiple sclerosis franchise, fully enroll our phase 3 trials for aducanumab, reinvigorate our pipeline in the areas of neurology and neuro-repair, and invest in our employees as we work together to define our future," Vounatsos said in a statement.

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