[Updated, 9:20 a.m. ET, see below] Biogen has seen its highest highs under CEO George Scangos, but some lows too. After a year in which Biogen’s share price has fallen by more than a third and one of its top drug prospects failed, Scangos, who has led the company since 2010, has announced plans to step down.
As part of its earnings release, Cambridge, MA-based Biogen (NASDAQ: [[ticker:BIIB]]) said this morning that Scangos will leave the company “in the coming months” after a successor is identified. Biogen is beginning a search immediately, and will consider candidates from both within and outside the company.
“The company has an exciting future and I am proud to have had a role in helping Biogen improve the lives of so many patients today and so many more in the future,” Scangos said in the statement. “This is the right time for a new leader to take the reins and lead Biogen through its next stage of development, and I look forward to returning to the West coast to take on one more set of activities and spend more time with my family.”
The news comes amidst a difficult year for Biogen, marked by executive changes, a lagging stock price, and general angst about the high-risk, high-reward strategy championed by Scangos during his tenure.
Scangos, the former head of Exelixis (NASDAQ: [[ticker:EXEL]]), was named Biogen’s CEO in 2010 during a rocky time. Biogen was in a long-running battle with Carl Icahn about its strategic direction and hadn’t produced any FDA approved drugs in six years. But Icahn sold off his stake, and Scangos made a number of changes, like closing the company’s San Diego research site—part of its old “Idec” name, from its merger with Idec Pharmaceuticals in 2003—cutting a bunch of jobs, reshaping the company’s management team, moving its headquarters from the Boston suburbs to Cambridge, and altering the company’s strategic course. He also benefited from a program already in place, an oral multiple sclerosis drug called dimethyl fumarate (Tecfidera) that went on to win FDA approval in 2013 and become a blockbuster drug. It’s currently Biogen’s top-selling product, generating close to $2 billion in sales during the first half of 2016.
“George joined Biogen at a very challenging time. He re-organized operations and he oversaw the enrichment of our product pipeline and the launch of several products,” said Biogen chairman Stelios Papadopoulos, in a statement. “In short, George did an outstanding job and I believe he is leaving the company well positioned for success.”
Under Scangos, Biogen has also by design amassed a risky pipeline, highlighted by a potential Alzheimer’s drug, aducanumab, and another drug, opicinumab, meant to repair nerve damage in patients with multiple sclerosis. In January 2015, Biogen shares were at over $400 apiece as the company was gaining steam on early positive signals for aducanumab. Shares have since eroded significantly, but Biogen has restructured and cut a number of jobs to support its risk-heavy investments, halting preclinical work in immunology and fibrosis. In May, Biogen even announced plans to spin off its hemophilia business—which includes two marketed drugs for the blood disease—into a new company. Biogen has in effect continued to double down on risky bets, the largest of which is the ongoing Phase 3 for aducanumab, which could swing the fortunes of the company wildly one way or the other. One of those big bets flopped in June, when opicinumab failed a Phase 2 trial in MS. Another important late-stage program, in partnership with Ionis Pharmaceuticals (NASDASQ: [[ticker:IONS]]), is a treatment for a rare debilitating muscle disease called spinal muscular atrophy. Data from a Phase 3 trial are expected next year.
Shares of Biogen currently trade around $262 apiece. And while that’s billions in value lost from Biogen’s highest highs, it’s also orders of magnitude higher than when Scangos arrived in June 2010, when shares were at less than $50 apiece. It’ll be interesting to see which direction Biogen heads from here strategically. Biogen has been very deliberate in its dealmaking, reluctant to make a big splash with a large acquisition. The angst regarding that strategy has only heightened as it’s increased its focus on risky programs. As Jefferies analyst Brian Abrahams wrote in a note this morning, the company is “at a strategic crossroads.”
[Updated with CEO comments] On a conference call with analysts on Thursday morning, Scangos said the company is focused “largely on neurology” for potential deals, and that the CEO transition wouldn’t impact its business development efforts. Scangos wouldn’t rule out deals outside of neurology, but said the “bar gets higher” for an acquisition or partnership when it’s further removed from the company’s core expertise.
“You can make more sophisticated decisions about areas you really understand in detail,” he said, adding that the company is in “a number of discussions” now and aims to bring some of those to a conclusion.
Shares of Biogen surged more than 6 percent in pre-market trading Thursday morning.
Here’s more on Scangos in 2011, shortly after he left Exelixis to take the Biogen job. Biogen is holding a conference call this morning to discuss its quarterly earnings.
