Biotech/Pharmaceutical

Will MS Portfolio Support Biogen Inc (BIIB) in Future?

Will MS Portfolio Support Biogen in Future?
The biotech has to take assertive measures and seek other therapeutic fields such as oncology and hematology to overcome the revenue decline in the near future

Biogen Inc.’s (NASDAQ:BIIB) dependence has increased upon the sale of its Multiple Sclerosis portfolio, which contributes approximately 38% to the total global sales and 80% in the company’s revenue. With the passage of time, the growth of the segment has become stagnant and is now showing signs of decline.

Keeping in view the revenue generation of the MS profile, Biogen is working on different aspects to patch up the expected decline in the company’s overall revenue. Biogen is looking for new ventures and lucrative therapeutic fields in order to boost its profile. The investors are keenly observing the steps it has taken and some analysts have opined of a possible buyout

In the US, the growth factor mainly depends on the drugs’ price. There is no relation of growth hike to the sales volume, which is risky for multiple drug companies that only depend on one or two blockbuster molecules or franchises. Biogen MS franchise has shown 9% growth due to the price increase.

Due to the strong reliance on the MS portfolio, Biogen has been facing criticism from the analysts as its sales are now at risk as MS drugs’ growth is slowly driven by suppression in disease morbidity. According to the GlobalData statistics, MS is expected to touch $20 billion by 2024 with a Compound Annual Growth Rate (CAGR) of 1.5% through 2024.

Analysts Brian P. Skorney and Neena M. Bitritto-Garg stated: “We continue to see the firm facing headwinds towards the back half of the year as MS sales flatten and clinical data catalysts dry up. The company is ripe for an effective deal, and with valuations coming back in over the last year, we think it's time for Biogen to buy or be bought.”

Despite the aforementioned threat, the MS drugs are under constant pressure from the pricing factor along with fierce competition as multiple molecules have been launched, having same efficacy and safety profile. The company has invested a huge amount in its research of development (R&D) of novel molecules, which can replace MS aging franchise.

Noteworthy drugmakers such as Novartis, Sanofi, and Teva have put in all their efforts to clinch major share from the therapeutic market. In 2013, Food and Drug Administration (FDA) launched Tecfidera for the management and treatment of different ailments of MS. In 2015, the drug touched $3.64 billion proving its efficacy and safety profile, but in 4QFY15, the patients taking the drug fatal brain injury known as Progress Multifocal Leukoencephalopathy (PML), which resulted in a huge dent in the drug’s sales. On the other hand, analysts downgraded sales expectations from $9-5 billion.

Keeping in view the safety allegations on Tecifedra, Biogen has boosted its efforts on marketing the molecules. The marketing campaign raised the sales growth by 12% year-over-year (YoY) in 2QFY16. According to Bloomberg, drug sale is expected to touch $4.7 billion by 2019 with a growth of $0.7 million.

According to the company’s estimates, Tecifedra is expected to clinch 25% of the patients either newly diagnosed or switched from a previous course. The Street analysts predicted sale of $4.2 billion in 2016 depicting 45.5% YoY growth.

Biogen’s MS franchise includes Avonex, Tysabri, and Plegridy are playing their vital role in the management and treatment of MS patients. The above drugs are facing fierce competition due the launch of other drugs in oral formulation with better side effects and safety profile.

Biogen’s Avonex and Plegridy belong to the interferon group, which poses high-degree of side effect profile. On the other hand, Tysabri patients are also linked with the treatment of PML that directly affects the drug sales.

Wall Street analysts predicted Tysabri sales to grow by 4.6% YoY touching $2 billion in 2016. The company has a firm belief that the patients suffering from active MS ailment prefer it over others and the drug has opted 30% of new and switched patients from other treatments.

Avonex is expected to generate $2.3 billion, which represents a decline of 11% on YoY basis, while Plegridy’s revenue is expected to grow 50.4% YoY. Both the molecules are leading the interferon market. In addition, to maximizing the drug portfolio, the company is launching Zinbryta for the treatment of multiple forms of MS this month.

With the increasing pressure and challenges on the MS portfolio, Leerink Partners analyst Geoffrey Porges expects that the sales of the MS franchise to decline at a more rapid pace in the near future. The company’s revenue is expected fall 3.9% in FY17 compared to 40% in 2014.

The drugmaker is facing constant pressure from the investors to look for other options and to invade other lucrative therapeutic fields such as oncology and hematology to compete with its competitors including Amgen, Celgene, and Gilead. The majority of the biotech companies have boosted their R&D segment emphasizing the oncology portfolio, which is expected to touch $147 billion by 2018.

Biogen has an exceptional opportunity to enter the lucrative field of oncology, as till date, it does not have any molecule covering the oncological ailments. For the inclusion of the oncology drugs, the company has to acquire some companies having oncology drug pipeline to remain in the biotech arena.

Future Prospects

Biogen is still hopeful that its MS franchise will grow and is working on its investigational MS drug opicinumab. The drug is indicated in the reversal of nerve damage by MS. In addition, Biogen also covers the Central Nervous System (CNS) ailments such as Alzheimer’s disease. Aducanumab is the top line candidate for management and treatment of AZ, which is expected to generate $10 billion annually, but the drug has failed to show its efficacy and safety hour in the later stages of the clinical trials.

Till date, there is no treatment available in the market. The therapies only help in minimizing the progression of the disease and reducing the signs and symptoms.

Baird stated in its report regarding the research on Aducanumab: “The Phase 3 program for aducanumab continues to enroll, and though management is not guiding on the timeline, they hinted that similar trials have taken 22-33 months. Management is pleased with the progress so far, but noted challenges due to high screen rate failures (i.e., no plaque visible on PET) and a low diagnosis rate among prodromal/mild patients.”

In addition, the drug pipeline has four investigational molecules in phase 3 trials indicated for CNS and MS ailments.

On the other hand, Biogen and Eisai are working under mutual collaboration for the development of BACE inhibitor therapy for the management of AZ. Noteworthy drug makers such as Eli Lilly, AstraZeneca, and Merck are competing for the same.

Recently, Biogen has announced a spinoff of its hemophilia segment that includes Alprolix and Eloctate. Both the drugs are now in a position to reap business and can aid in the revenue generation of the company.

According to a person familiar with the matter, till date, the biotech has not received any offer from a potential buyer, but some of the company representatives individually approached directors. The company has a cash flow of $3 billion and is able to acquire small pharmaceutical companies. Biogen stock is trading at its lowest level, so it could be an easy acquisition.

For more information about Biogen, please refer to our Biogen Data Analysis Section.

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