Biogen needs to fill pipeline or rethink strategy

Biogen shows how fleeting biotech success can be: all it takes is a couple of clinical setbacks and slowing revenue growth and investors begin demanding strategic course corrections.

Yesterday’s announcement of a new share buyback and departure of chief executive George Scangos seems calculated to assuage traders in the short term. But Tecfidera’s slackening sales and commercial threats, along with a pipeline heavily tilted toward a high-risk Alzheimer’s disease readout in 2020, have analysts speculating whether M&A is in the group’s near-term future – although at a $62bn market capitalisation only a few players could afford a takeout (see tables below).

Tecfidera wanes

A look at Biogen’s forecast puts its issues in plain view. Its big seller, Tecfidera, which burst onto the multiple sclerosis space in 2013 as a pill that had fewer safety concerns than Novartis’s Gilenya, is hitting a plateau. Bullish sales forecasts of over $6bn in 2020 have been trimmed, and the EvalutePharma consensus now sees $4.7bn in 2022.

Biogen's top 10 sellers in 2022
Annual sales ($m)
Product Therapy area Patent expiry 2015 2022 CAGR
Tecfidera MS 7 Feb 2028 3,638 4,713 4%
Tysabri MS 26 Apr 2017 1,886 1,487 (3%)
Avonex Interferon  30 Sep 2026 2,630 1,300 (10%)
Aducanumab (PIII) Alzheimer's - - 941 n/a
Plegridy Interferon  30 Sep 2026 339 910 15%
Eloctate (sales and royalities) Haemophilia 17 May 2028 326 805 14%
Rituxan (royalties) Lymphoma 18 Dec 2018 1,339 747 (8%)
Nusinersen SMA 31 Dec 2030 - 742 n/a
Alprolix (sales and royalities) Haemophilia 6 Mar 2028 230 597 15%
Ocrevus (royalties) (Filed) MS - - 468 n/a
Total incl others  10,764 14,883 5%

Part of the reason is the advance of Roche’s Ocrevus, which if it achieves FDA approval later this year looks to be neck and neck with Tecfidera in MS by 2022, with $4.4bn in sales. This is not all bad for Biogen, of course – ironically, Ocrevus was a discovery of a Biogen predecessor company, Idec Pharmaceuticals, and its royalty stream constitutes Biogen’s 10th-biggest seller in 2022.

Ocrevus, a biological, is infused only once every six months, so arguably could compete well against Tecfidera in the relapsing form of the disease, but of course the primary progressive form is where competition will be less intense.

Branded MS market – top 10 sellers
Annual sales ($bn)
Product Company 2015 2022 CAGR
Tecfidera Biogen 3.64 4.71 4%
Ocrevus (Filed) Roche - 4.38 n/a
Aubagio Sanofi 0.97 2.11 12%
Tysabri Biogen 1.89 1.49 (3%)
Copaxone Teva  4.02 1.34 (15%)
Avonex Biogen 2.63 1.30 (10%)
Gilenya Novartis 2.78 1.24 (11%)
Ampyra Acorda  0.44 1.19 15%
Lemtrada Sanofi 0.27 1.07 22%
Rebif Merck KGaA 1.99 0.98 (10%)
Total (incl others) 20.18 23.65 2%

Relying on Alzheimer's

Of Biogen's top 10 sellers in 2022, only two are currently in clinical development, and both are speculative. Aducanumab is an antibody blocking beta-amyloid accumulation in the brain, an approach that has yet to see success in treating Alzheimer’s; nusinersen is a spinal muscle atrophy treatment relying on RNA antisense, a mechanism of action that has struggled to make headway.

The net present value (NPV) of these two products, as calculated from EvaluatePharma’s consensus of sellside forecasts, accounts for 16% of the group’s share price – at 11%, aducanumab is bigger than everything but Tecfidera and Tysabri.

The most valuable products in Biogen's portfolio
Product Therapy area Today's NPV ($bn) NPV as % of market cap
Marketed products
Tecfidera MS  20.3 33%
Tysabri MS  7.8 13%
Avonex MS  5.3 9%
Rituxan Lymphoma 3.8 6%
Plegridy MS 3.2 5%
Eloctate Haemophila  2.7 4%
Alprolix Haemophila  2.1 3%
Subtotal 46.1 74%
R&D projects
Aducanumab Alzheimer's  6.9 11%
Nusinersen SMA 3.0 5%
Opicinumab MS  1.3 2%
Sub-total 13.6 22%
Total 60.3 97%

As a sign of this Biogen’s shares have shrunk 30% since phase I data for aducanumab showed mixed efficacy a year ago today, 22% in the immediate aftermath (Glimmers of support, but no Alzheimer’s breakthrough, July 23, 2015). Its phase III programme comprises two trials and 2,700 patients undergoing 78 weeks of treatment, with readout expected in early 2020.

In its quarterly results call yesterday, Biogen's R&D chief, Michael Ehlers, said additional safety data from a phase Ib trial will be reported later this year. However, a bigger share catalyst around aducanumab might be data from Lilly’s Expedition 3 trial of the similarly acting antibody solanezumab, which are expected later this year.

Totalling the NPV of all Biogen’s marketed and R&D products equals 97% of its market capitalisation, so bad news for aducanuamb, whether from its own development or for external projects, will lead to further share falls. And nusinersen likewise needs to perform in the clinic.

Big biotech peer group analysis
Rx sales ($bn) Total market ranking
2015 2022 CAGR (2015-22) 2015 2022 Today's NPV ($bn) Market cap ($bn)
Gilead  32.2 28.2 (2%) 6 11 104.7 116.2
Amgen 20.9 27.0 4% 11 14 133.2 123.3
Celgene 9.1 24.1 15% 23 15 95.6 83.2
Shire 6.1 19.4 18% 29 18 88.4 58.0
Biogen 9.2 12.6 5% 22 24 60.3 61.9
Total market 744.2 1118.5 6%

In the relative equivalence of its forecast valuation and market capitalisation Biogen is unique among its biotech peers. Investors have not ascribed as much value as the sellside to the marketed and R&D projects of Amgen, Celgene and Shire, while the reverse is true of Gilead Sciences. Gilead is looking at shrinking sales as its hepatitis C franchise fades, while the other companies will continue to grow sales – if only at single-digit rates in the cases of Amgen and Biogen.

Being in charge of a publicly traded company can be a case of investors constantly asking, “What have you done for me lately?” In the case of Biogen, careful management of its MS franchise does not appear to be enough. Filling the pipeline or a strategic rethink could be more to shareholders’ liking.

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @ByJonGardner on Twitter

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