October 15, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Cambridge, Mass.-based Biogen, Inc. has analysts scratching their heads as stock prices drop and investors abandon ship.
With the company’s third-quarter results scheduled for Oct. 21, analysts are double-checking the company’s second-quarter financials. In that reporting, the company’s drug to treat multiple sclerosis (MS), Tecfidera, had revenues of $883 million compared to $700 million in the same quarter in 2014. The breakdown was $721 million in the U.S. and $163 million outside the U.S. In the U.S., Tecfidera revenues increased 11 percent in the U.S., but were offset by an 8 percent decrease outside the United States, primarily due to lower pricing in Germany.
That drop was enough to make investors jittery, despite overall increases in volume sales. Some of that nervousness is probably just a response to overall market volatility this summer and fall, although Biogen did have reports of two deaths related to the common ingredient in Tecfidera. A female patient died from a reaction, developing treatment-related progressive multifocal leukoencephalopathy (PML). But she did not actually receive Tecfidera, but some of the ingredients in Tecfidera were mixed together at a compounding pharmacy in Holland.
In November 2014, the U.S. Food and Drug Administration (FDA) reported on a patient treated with Tecfidera developing PML, even though the agency admitted that it did not know if there was an actual correlation between the drug and the rare condition. Given the millions of patients worldwide who have received the drug safely compared to two incidences of PML, the stock market’s reaction is overblown at best if those were the only source of concern.
There have also been changes in management recently. On Oct. 9, the company announced that Tony Kingsley, executive vice president, Global Commercial Operations, was leaving the company and a search had started for his replacement. John Cox, executive vice president of Pharmaceutical Operations & Technology would fill his position in the interim.
In July, the company announced that Douglas Williams, head of the company’s research and development program, was leaving the company. He was replaced by Alfred Sandrock, the chief medical officer, and Spyros Artavanis-Tsakonas, the company’s chief science officer, pending a permanent replacement.
All of which appear to be factors in the company’s stock woes. Shares traded on Mar. 30, 2015 for $475.98, dropped to $409.50 on July 21, further to $309.43 on July 27, then plunged still further to $278.35 on Aug. 24. Shares are currently trading for $257.11.
Despite promising MS and Alzheimer’s drugs, analysts and investors are looking for reassurance, some of the concern aimed at the company’s executive leadership. Referring to Biogen’s chief executive officer, George Scangos, analyst John Schroer of Allianz Global Investors told Bloomberg Business, “George needs to light a fire under the commercial team to start delivering.”
Another concern is that of the top 20 company shareholders, 15 recently cut their stake in the company.
Other analysts point out that the company is still very sound and has some very promising drugs. Geoffrey Porges, an analyst with Sanford Bernstein & Co., said its pipeline was “among the best in the industry,” according to Bloomberg.
The company’s efforts toward an Alzheimer’s drug are very promising, although still years away from approval. Also, history has shown that Alzheimer’s drug development is a wasteland of failed clinical trials. “Alzheimer’s disease is an area that’s more and more interesting to me,” said Rajiv Kaul, manager of Fidelity’s Select Biotechnology Portfolio, told Bloomberg. “There’s limited early data but there’s reasons to be optimistic.”
And there have been rumors of Biogen being a possible takeover target for some time. Or, perhaps, Biogen might acquire another company, since it has a cash stockpile of $4.5 billion. Potential targets mentioned have included Receptos Neurocrine Biosciences, Inc. and bluebird bio .
Speaking in July to the Boston Globe, Cowen and Company analyst Eric Schmidt said, “We are in a world of eat or be eaten. If they don’t deploy their cash efficiently or properly, there’s always a chance that somebody may come in and monetize their assets for them.”
Meanwhile, everyone waits for October 21 and the third quarter results.
