Why Even Spinraza Can't Save Biogen's Incoming MS Meltdown

Published: Oct 25, 2017 By

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Biogen (BIIB) released its third-quarter financials yesterday, showing total revenues of $3.1 billion for the quarter, a 4 percent gain compared to the same period the previous year. There were some bright lights, a few puzzles, and going a bit deeper, some concerns regarding its multiple sclerosis franchise.

Biogen reported a 13 percent increase excluding hemophilia revenues, because in the first quarter it completed the spinoff of that business unit into a new company, BioverativThe multiple sclerosis revenues were $2.3 billion, which included about $65 million in royalties on Ocrevus. The company’s Spinraza for spinal muscular atrophy (SMA) brought in $271 million in global revenue.

The Spinraza data was one of the puzzles. The company reported domestic revenues in the second quarter of $195 million, with the third quarter $198 million, which would suggest sales are flat. But Biogen execs claimed the medication had 75 percent more new patients at the end of the third quarter than it did at the end of the second quarter, that 10 percent of the patients in this most recent quarter were on maintenance dosing. At the conference call, several analysts asked for a clarification, and some were happy with the answers and some weren’t.

Salim Syed, with Mizuho, was one who didn’t think Biogen answered the question, noting the management failed to give “enough detail to square flattish revenue growth.” However, Michael Yee, an analyst with Jefferies, said that it “does generally jibe with our model.” Ronny Gal, an analyst with Bernstein wrote in a note, “we think new starts are flat, but patient number is growing,” going on to say, “the number of new adds is likely to be fairly stable.”

Company executives assured investors and analysts that they expect more growth in Spinraza sales. Sales outside the U.S. were particularly strong in Germany and Turkey, and generated worldwide sales of $271 million, which beat the consensus estimates by 12 percent. One potential cloud on the horizon is AveXis, which is expected to present positive top-line data from its Phase I trial of AVXS-101 in SMA Type 1 soon. An overview of the data in 12 patients was positive, which if the drug were eventually approved, would present Biogen with some competition.

But what has analysts concerned most is the company’s multiple sclerosis (MS) franchise, which makes up most of the company’s revenues. The company became even more dependent on MS sales after it spun off Bioverativ.

Max Nisen, writing for Bloomberg, noted, “At some point, Biogen’s MS franchise is going to shift from stagnation to outright decline. An increasingly competitive market all but demands it. It may be starting already. Two of the company’s most important MS medicines, Tysabri and Tecfidera, missed analyst sales expectations in the third quarter.”

Roche has a competitive drug, Ocrevus. Biogen receives royalties on the drug, but that’s unlikely to make up for other losses and decreasing prices. And Celgene has a potential competitor in ozanimod, which could be approved in 2018. Mylan NV has a generic of Teva Pharmaceutical Industries' Copaxone which is just entering the market, which will also have a negative effect on Biogen’s MS portfolio.

Many analysts believe Biogen’s MS revenue will stay steady for a few years, but Nisen is skeptical. “Biogen is going to lose market share,” he writes. “And it will no longer be able to rely extensively on price hikes for MS drugs. In fact, it will have to offer larger discounts to convince insurers to keep covering its medicine.”

Biogen hasn’t shown much sign of acquiring smaller companies or mergers in order to bolster competitive headwinds. Spinraza was a start, but it’s only one drug for a rare disease. Otherwise the company has doubled-down on its Alzheimer’s program. If aducanumab or any of its other Alzheimer’s drugs were to get approved, the MS franchise would likely be a drop in the bucket compared to their revenues, but Alzheimer’s research is a wasteland of drugs that failed Phase III clinical trials.

Earlier this week, Biogen paid Neurimmune Holding AG an additional $150 million, the company Biogen acquired aducanumab from. The additional payment will reduce any potential royalty payments on sales of the drug, if it should be approved, and the story at least suggests that Biogen is basing the decision on some as-yet-disclosed data. And this was only a few days after Biogen expanded its collaboration with Japan-based Eisai over aducanumab. That renegotiated the expected revenues of geographic areas if aducanumab meets Phase III clinical endpoints and makes it through the regulatory gauntlet.

It seems like a gamble, but maybe Biogen is basing their decisions on promising data. The company’s chief executive officer, Michel Vounatsos, said in a statement, that the amended deal with Neurimmune “improves aducanumab’s portential value to Biogen as we pursue our strategic goal of leadership in Alzheimer’s disease.”

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