Advice for Biogen: Take a Page Out of Biotech's Best Friend Celgene's Playbook

September 9, 2016
By Alex Keown, BioSpace.com Breaking News Staff

BOSTON – While there are countless questions as to whether Biogen will acquire or be acquired, analysts with Citigroup contend that Biogen should look to New Jersey and take a page out of rival drugmaker Celgene ’s playbook—spend money to develop partnerships that will generate new streams of revenue.

In a new blog on Barrons, Citigroup’s Robyn Karnauskas and Mohit Bansal provide their two-cents on how the Boston-based Biogen can grow through striking deals with other companies, much the way Celgene has. It was something the duo put to Paul Clancy, Biogen’s chief financial officer during a recent meeting. While Clancy said striking deals could be beneficial for Biogen, he said the company was committed to the neuro market and did not see a lot pf M&A targets that currently made sense for the company’s long-range goals.

Since 2014 Celgene has spent more than $3 billion in partnerships, most noticeably the $1 billion the company invested in a 10-year partnership with Juno Therapeutics or the more recent deal with Jounce Therapeutics that could be worth up to $2.5 billion. Celgene also has collaborations with companies like Agios , Bluebird Bio , Epizyme and others. In 2014, Celgene entered into 10 deals, shelling out an average of $222 million in upfront payments to its partners. Celgene’s partnership goals has been a strategic effort to diversify revenue streams so it is not so financially dependent on its blockbuster blood cancer drug, Revlimid.

While the Citigroup analysts suggested Biogen look to form partnerships, there have been questions as to whether or not another company should swoop in and acquire Biogen. Biogen’s revenues are primarily driven by its products treating multiple sclerosis and hemophilia. During Biogen’s most recent quarterly report, its MS leader, Tecfidera, brought in $987 million in the quarter, an increase over the first quarter’s $946 million. Its two hemophilia medications, Electate and Alprolix, brought in $125 million and $80 million, respectively. During the second quarter Biogen reported revenue of $2.9 billion.

In a recent article highlighted on BioSpace, the Motley Fool’s George Budwell noted that Biogen is projected to see continued growth, but he pointed out that its focus on the market for central nervous system treatments is a high-risk undertaking. One such drug that could be a financial boondoggle if it fails is the company’s Alzheimer’s treatment, aducanumab, which targets amyloid plaque. If it proves successful though, the risk would likely be well worth the reward as the drug would be a potential blockbuster. But the risk is there. In June, Biogen saw an MS drug, opicinumab, fail in a Phase II trial, which caused the company to lose $8 billion in market value overnight.

If the company is a target for takeover, Clancy told the Citigroup analysts the employees working for Biogen, particularly the scientists, may not like the idea of working for another company. He said they would be “less inclined to be a part of a new place with less autonomy,” according to the Barrons’ blog.

Biogen is not he first company that has been pointed to Celgene as an example of how to grow through partnerships. In July, analysts at the Motley Fool made a similar recommendation to Foster City, Calif.-based Gilead Sciences . Gilead is known for having a dominant position in the HCV market, with the bulk of the company’s revenue tied up in two drugs, Harvoni and Sovaldi. Those two drugs accounted for $20 billion in revenue in 2015, but, the success of the drugs means there’s a dwindling patient pool in the HCV market.