What's Behind Bioverativ's Spin-Out, and Should You Buy?

By Motley Fool Staff Markets Fool.com

Biogen Inc. (NASDAQ: BIIB) recently completed spinning off its fast-growing hemophilia drugs into a new company, Bioverativ (NASDAQ: BIVV). The spinoff creates one of the most interesting players in a $10 billion market for hemophilia drugs, but the market is very competitive, and that could create some headwinds. Is Bioverativ a stock worth buying in your portfolio? Analysts Kristine Harjes and Todd Campbell walk you through Bioverativ's market potential in this clip from The Motley Fool's Industry Focus: Healthcare podcast.

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A full transcript follows the video.

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This podcast was recorded on Feb. 1, 2017.

Kristine Harjes: Biogen is spinning off its hemophilia franchise --I shouldn't even say "is spinning off." As of today, they have spun off this company calledBioverativas a stand-alone company that will focus on hemophilia. How are you thinking about this spinoff?

Todd Campbell:It's a really interesting decision on their part. The drugs that are being spun out,Alprolix andEloctate, those twohemophilia drugs are their fastest-growingdrugs in their product lineup. So they decided to take thispart of their business and spread it outso that they can focus moreon these neurological disorderslike multiple sclerosis and,like we'll talk about in a minute,things like Alzheimer's disease and Parkinson's disease and whatever, that'sgoing to be what's leftat Biogen. Then, they're taking these smaller drugs that are less corebut also very fast growing, and spinning them off.I think there are some intriguing reasonswhy they're doing this. It's kind of speculative on my part,but I think the reason they're doing this is, this is anincreasingly competitive market. Toback up for a second, those twohemophilia drugs from Biogenreshaped hemophilia treatment. Again,similar to the conversation we just hadon the last part the show, reducing the patient burden bylowering the number of doses of the medicine that they need to take every week. By doing that,reshaping that and reducing the patient burden,these drugs have really taken off and becomepretty meaningful drugs. Combined, they generated over $800million in sales last year.

Harjes:This is a pretty big indication. There's 400,000 peoplein the world affected by hemophilia. This company launched today. Its ticker, if you're interested, is BIVVV. How the spinoff works is that Biogen shareholders,at the close of business on Jan. 17,received one share of the new companyfor every two shares that they had of Biogen. Did I get that ratio right?

Campbell:Yeah. Probably thebiggest question on people's minds, Kristine, right now --since it was a spinoff, do I hold these shares? If you're a Biogen investor right now, and you justreceived these shares in this new spinoff,should you keep it or not?I think one interesting thing to keep inthe back of your mind, I was talking aboutthe competitive landscape, while these two drugs reshapedtreatment, all of the other hemophilia playershave also been developing theirlonger-lasting formulations as well,and those have all been hitting the marketand becoming available over the last 12 months. So, 2017 and 2018, we could see a much more drastic slowing in the top-line growth for this new company. People aregoing to have to keep that in mind. On the other side of that, they have to say, we also know,because it's so competitive, there has been a lot of acquisition activity.Shirespent a truckload of money to buy Baxalta, one of the largest players in the space, just a couple years ago.So it wouldn't be too shocking. That was also a spinoff,by the way, that was spun off byBaxter. So it wouldn't be too shocking to me if this company, maybe,ends up becoming a target at some point in the next couple years. No, that's not necessarily a reason to hold the stock. Butit's something to keep in the back of your mind.

Kristine Harjes has no position in any stocks mentioned. Todd Campbell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Biogen. The Motley Fool recommends Baxter and Bioverativ. The Motley Fool has a disclosure policy.