No, aducanumab is not an Alzheimer’s drug either

Failure at a futility analysis blows a big hole in Biogen's pipeline. Can the company buy in growth or will its valuation sink enough for it to become a target?

It doesn’t work. Those three words might apply to the Alzheimer’s project aducanumab as much as to the amyloid hypothesis underlying its rationale, as well as to Biogen, the company sponsoring it.

The group pulled the plug on two phase III trials of the project today after it became clear that the anti-amyloid MAb would not delay cognitive decline. Biogen had bet heavily on success of the Engage and Emerge trials, believing that aducanumab was able to clear amyloid lesions more effectively than similar, failed agents, but it now finds itself in the unenviable position of needing to buy growth to prevent a low-ball bid from an opportunistic buyer.

Shares fell 28% in early trading, erasing $17bn in valuation. Still, the company will be a $45bn beast even with that valuation decline, making it a possible target only for the biggest of the big. Biogen's ageing portfolio and lacklustre pipeline raise the question of why any big pharma would buy it, aside from for short-term cash-flow reasons.

An analysis of the net present values of Biogen’s marketed products and pipeline assets, derived from EvaluatePharma’s consensus of sellside analysts, suggested that the group was overvalued based on yesterday's closing share price. 

However, the group now looks fairly valued at $45bn, its current market cap today, after the removal of aducanumab.

What's it worth? Valuing Biogen's products & pipeline
Product 2024e sales ($m) Today's NPV ($m) NPV as % of share price*
Tysabri 1,588 8,288 13%
Spinraza 1,655 7,653 12%
Tecfidera 3,309 7,593 12%
Rituxan Royalties 6,592 10%
Avonex 1,169 4,868 8%
Ocrevus Royalties 2,493 4%
Benepali 435    
Plegridy 330 1,114 2%
Imraldi 205 915 1%
Flixabi 252 874 1%
Ampyra 121 224 0%
Fumaderm 17 68 0%
Vumerity 111 239 0%
Phase III
Aducanumab 2,486 10,011 16%
BIIB093 107 495 1%
Elenbecestat - 383 1%
BIIB074 15 51 0%
Phase II projects 101 1,317 2%
Phase I projects 15 57 0%
Total 11,916 54,919 87%
Total minus aducanumab 9,430 44,908 71%
*Biogen share price at market close, Mar 20, 2019. Source: EvaluatePharma.

In addition, the analysis suggests that investors were more enthusiastic about aducanumab than analysts were – the sellside had put aducanumab's value at around $10bn.

This leaves a lacklustre pipeline for Biogen that is currently valued at just $2.6bn, and even that forecast looks on shaky ground. Of the group's pipeline, the Bace inhibitors BAN2401 and elenbecestat account for $1bn, and these agents look no more promising in Alzheimer’s disease than the anti-beta amyloid MAbs like aducanumab (Subgroup data no balm for Biogen/Eisai Alzheimer’s drug, October 26, 2018).

What to do

Having laid a losing bet in Alzheimer’s, Biogen’s management needs to make a decisive move to restore investor enthusiasm. The knee-jerk response might be another gene therapy acquisition. The $800m takeout of Nightstar Therapeutics announced two weeks ago suggests that executives are well aware of the sector’s focus in recent months, and in Nightstar Biogen acquired the ophthamology gene therapy project with the biggest forecast.

Biogen tends to stay focused on central nervous system indications, and here there are not many gene therapies to choose from. Axovant has the CNS gene therapy with the biggest forecasts in the Parkinson’s disease asset Axo-Lenti-PD (Axovant reaps the rewards from its gene therapy refocus, March 11, 2019).

Sarepta’s focus on Duchenne muscular dystrophy is in an area adjacent to the multiple sclerosis work that has served as Biogen’s bread and butter for years, so this could also be a sensible, if expensive, choice that would come at a premium to Sarepta's current $9bn market cap. Sarepta shares rose 3% in early trading today.

Apart from those speculative targets, Mizuho analyst Salim Syed suggested various CNS-focused groups including Sage Therapeutics – whose post-partum depression drug Zulresso was approved on Tuesday – Neurocrine Biosciences, Acadia, Biohaven and Alder. Shares in all those companies have risen strongly in morning trading.

Keen followers of the Alzheimer’s disease space knew what a big bet aducanumab was. Perhaps the only surprise was that the outcome was a surprise to anybody, least of all Biogen’s management, and had executives planned better for the potential of failure then today’s carnage might have been avoided. Biogen's strategy meetings will now be tinged with a measure of desperation.

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