Biogen's Promising Pipeline Underscores CEO’s High-Risk Strategy

Biogen's Promising Pipeline Underscores CEO’s High-Risk Strategy
January 18, 2016
By Mark Terry, Breaking News Staff

Investors and analysts are trying to decide if Biogen, with its high-stakes shift toward Alzheimer’s research, is a good investment. At the recent J.P. Morgan Healthcare Conference held last week in San Francisco, company chief executive officer George Scangos made an effort to reassure investors that he knew what he was doing.

“We get comments a lot that our pipeline is risky,” Scangos said in a presentation in San Francisco last week. “That we’re addressing areas where the industry has had a hard time being successful. We are addressing those areas. If we weren’t addressing those areas then I’d be up trying to answer the question of why we think we could maintain good pricing in … me-too indications.”

The issue partially is that Biogen , which has been enormously successful in the multiple sclerosis (MS) market, has shifted some of its focus toward Alzheimer’s research. Anything in the neurological disease market is high risk, and Alzheimer’s is a noted wasteland of failed clinical trials, with more than 123 drugs having failed in trials for dementia.

On the other hand, Biogen argues—and Scangos’ statements support it—that you can gamble on developing a blockbuster where there’s a huge need, or you can keep tweaking existing drugs or create generics and biosimilars and spend all your time managing pricing.

Biogen recently caught analysts off guard at the J.P. Morgan Healthcare Conference when the company’s chief medical officer, Al Sandrock, indicated that the company planned to hire 150 staffers for neuroscience development. Back in October 2015, Biogen made the so-called “Biogen Bombshell,” when it announced it was laying off 11 percent of its staff, or about 880 jobs. It was also the time when the company indicated it was slashing several pipelines and shifting its focus toward Alzheimer’s research.

Sandrock, when asked about the layoffs, said, “That’s behind us. We’re on the cusp of breakthroughs on neuroscience.”

Writing for The Motley Fool, Sean Williams points out that despite some investor qualms, Biogen has a very interesting pipeline. The one that’s attracting the most attention at the moment is aducanumb, an experimental drug for Alzheimer’s. The clinical trial showed a statistically significant improvement in two measures of cognition over placebo. This resulted in the drug being streamlined past Phase II trials and directly into a Phase III clinical trial.

“The bad news?” writes Williams. “You’re not going to be getting any information on that Phase III study in 2016. However, Scangos does expect to report Phase Ib titration data sometime this year for aducanumab. I wouldn’t anticipate this being a huge mover for the share price in 2016, but next year aducanumab could make or break investors’ and patients’ hearts.”

Other drugs in the pipeline include anti-LINGO, which is an interesting drug. Initially studied in acute optic neuritis, it failed to meet its primary endpoint for that disorder. However, while studying the drug, Biogen scientists noticed that the drug appeared to regenerate nerves in the unaffected eye during the study. Now it is being studied in Phase II trials to slow, stop or reverse lesions connected to MS.

“Out of Biogen’s key trials,” writes Williams, “the Phase II anti-LINGO is, without question, it’s riskiest. It’s very possible anti-LINGO could fail in MS, but if it succeeds, Biogen’s dedication to the MS space and taking chances could be vindicated with a monstrous blockbuster.”

And Biogen is partnered with Ionis Pharmaceuticals on a third pipeline drug, nusinersen. It’s being studied for the treatment of spinal muscular atrophy, and is entered in two Phase III trials, ENDEAR for infants and CHERISH for children. Some Phase II data is expected this year, and the Phase III readout is expected in 2017.

“So these kinds of indications are the kinds of indications for which we will be able to maintain healthy pricing regardless of what the pricing environment looks like in the future,” Scangos said at J.P. Morgan. “If we attack these diseases in a measured, thoughtful way with a good understanding of the biology and good biomarkers we think the risk is quite reasonable, and the risk-reward benefit for our company, for our patients, is quite attractive.”

If you’re patient. And it’s not like the company’s going to go out of business or tank if one or even all of these trials fail. Its marketable drugs are still bringing in significant revenue, despite increased competition. It also is gaining strength in the hemophilia area, and in partnered oncology products.

“Even if all three of its key therapies above fail in clinical trials,” Williams wrote, “which I believe is unlikely, it could always fall back on its leading MS therapeutics, growing hemophilia program, and partnered oncology products. … Personally, I believe Biogen is right around an appropriate valuation here considering its slowing MS growth, but I would certainly be supportive of a higher valuation if aducanumab, anti-LINGO, and/or nusinersen hit the mark.”

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