[Updated, 1:00 pm ET, see below.] A month after the failure of its once-promising Alzheimer’s disease drug aducanumab shattered its share price, Biogen is trying to pick up the pieces.
Biogen (NASDAQ: [[ticker:BIIB]]) hosted a conference call Wednesday morning detailing its quarterly results. But financials aside, the call was about the Cambridge, MA, company’s future plans in the wake of aducanumab’s failure. And executives made it clear that while aducanumab was a bust, Biogen isn’t changing course. It isn’t giving up on Alzheimer’s. It is still focusing on neuroscience, despite the high-risk nature of the field. And it won’t break the bank for a big deal.
Instead, Biogen will continue to use its cash reserves “efficiently,” buying back shares while searching for the right targets to acquire, CEO Michel Vounatsos said.
“I believe that Biogen is set to rebound,” he said. “The Biogen team is taking the current situation very seriously.”
Biogen is known for its core franchise of multiple sclerosis drugs. That franchise, led by dimethyl fumarate (Tecfidera), remains its biggest revenue driver, accounting for about $2.1 billion of its $3.5 billion in sales in the latest quarter. But its performance has flattened, competition is emerging, and Tecfidera faces a patent threat from Mylan (NASDAQ: [[ticker:MYL]]). What’s more, Biogen’s fastest growing product, the spinal muscular atrophy drug nusinersen (Spinraza), which generated $518 million this quarter alone, will likely soon face competition from the Novartis (NYSE: [[ticker:NVS]]) gene therapy Zolgensma. An FDA decision on Zolgensma is expected within a month.
On the call, Biogen executives defended the company’s turf on both fronts. While the company is preparing for “all possible outcomes,” Tecfidera’s patents have already survived other challenges, Vounatsos said. Biogen has also filed for approval of an MS drug it is co-developing with Alkermes (NYSE: [[ticker:ALKS]]), diroximel fumarate (Vumerity), that is similar to Tecfidera.
In addition, despite the looming approval of Zolgensma and the clinical progress of risdiplam, a rival oral drug from Roche, Vounatsos believes Biogen’s drug “will remain the standard of care for SMA for years to come.” Vounatsos and R&D chief Michael Ehlers noted the breadth of data on real world patients on Spinraza—more than 7,500 patients worldwide have been on the drug, and some have been followed up to six years now.
Biogen has also recently disclosed promising results in Spinraza in SMA patients who haven’t shown symptoms yet, which Ehlers believe “sets the bar” for others. It believes there are many more SMA patients worldwide than initially anticipated. Ehlers noted that “alternative modalities” don’t have nearly as much data as Spinraza and have far more questions to answer.
By design under former CEO George Scangos, Biogen amassed a risky, neuroscience-focused drug pipeline, including a group of experimental Alzheimer’s treatments led by aducanumab, to supplement its MS franchise. The company even spun off a growing hemophilia drug business—Bioverativ—in 2017 to focus on that work. (Sanofi bought Bioverativ for $11.6 billion last year.)
That strategy, however, has left Biogen vulnerable. For years, pressure had ratcheted up on Biogen to make a big splash because much of the company’s future fortunes rested on aducanumab’s fate. That pressure is now amplified with aducanumab’s failure—the company lost almost a third of its value when it disclosed the disappointing results in March. As RBC Capital Markets analyst Brian Abrahams wrote in a research note at the time, the failure “will likely expose the significant risks to [Biogen’s] base MS business and SMA franchise.”
Yet even with a recent $800 million buyout of gene therapy developer Nightstar Therapeutics (NASDAQ: [[ticker:NITE]]), Biogen has largely focused on a series of small deals over the past few years. It’s done a number of one-off transactions to add drugs for Alzheimer’s, amyotrophic lateral sclerosis (ALS), stroke, schizophrenia, pain, and more to its pipeline. It doubled down on the partnership with Ionis Pharmaceuticals (NASDAQ: [[ticker:IONS]]), aiming to develop a slew of RNA drugs in the mold of Spinraza.
Biogen believes at least some of those deals could pay off within the next few years. During its presentation, Biogen ticked off 10 programs that should produce meaningful data before the end of 2020. Among them: an experimental RNA-based treatment for ALS, a lupus drug being developed with Belgian firm UCB, and an experimental drug for idiopathic pulmonary fibrosis. Once the Nightstar deal closes, it will have a few gene therapies for rare forms of vision loss in mid and late-stage testing. The success of some of these programs could lead Biogen into new therapeutic areas. “We have materially improved…[and] diversified our pipeline,” Vounatsos said.
[Updated with analyst comments.] But are those moves enough to help Biogen rebound? SVB Leerink analyst Geoffrey Porges was underwhelmed by Biogen’s strategy of making small investments while using much of its cash to buy back its own shares. In a research note, Porges wrote that many of the experimental programs Biogen touted target small groups of patients and thus, if they work, would only make “small contributions to offsetting the expected erosion of [the company’s] legacy products and franchises.”
“Unfortunately, [Biogen] probably only reinforced investors’ expectations that the company’s highest priority remains buying back stock, which has generally proven to be a terrible investment in the case of most large biopharmaceutical companies,” Porges wrote. Biogen shares ticked down about 2 percent, to $225 apiece.
Biogen is also sticking with Alzheimer’s. It has a few Alzheimer’s drugs in development that target the protein tau, not amyloid, as aducanumab did. But what of the other drugs it has invested in that do target amyloid? Two of them, BAN-2401 and elenbecestat, are being developed in partnership with Eisai. Right after aducanumab failed, the Japanese drug maker recently said it intends to start a Phase 3 trial of BAN-2401—which, as with aducanumab, showed promise, but also flaws in early testing. Biogen is taking a more cautious approach than its Japanese partner. Ehlers said today that the company will continue to dissect aducanumab’s failure, hoping to “inform the development” of BAN-2401 and elenbecestat.
“We will be able to give people an update when we have more clarity,” executive vice president and CFO Jeffrey Capello said.
