After promising M&A and buybacks to revive long-term prospects, Biogen refreshes board with three appointments to enthuse investors
Bruised by the titanic failure of its Alzheimer’s drug aducanumab and ahead of gene therapy competition for its flagship SMA treatment Spinraza, Biogen is fortifying its board with three new appointments to placate its increasingly disenchanted shareholder base that has seen the US drugmaker cultivate its pipeline around the now abandoned aducanumab.
Last Wednesday, company executives attempted to put a Band-Aid on the burn by telling analysts in a post-earnings conference call that they felt an “obligation to rebound” and intended to do so by engaging in M&A and buying back shares with the $42 billion they have in the bank, over the next five years.
On Monday, Biogen said it was hiring Catalent chief John Chiminski; senior advisor to life sciences PE firm EW Healthcare Partners William Hawkins; and managing partner of IBM Global Services Jesus Mantas. “We have heard the calls from our shareholders and have acted…” Biogen chairman Stelios Papadopoulos said in a statement.
Earlier in the first quarter, Biogen scrapped two large Phase III studies of aducanumab dissatisfied by the drug’s impact on the course of Alzheimer’s — and last week the company also disclosed it had shelved a late-stage study testing the drug’s ability to prevent onset of the disease, effectively discarding the drug. But it is still taking a wait-and-see position on its other amyloid beta Alzheimer’s drug BAN2401 — in stark contrast to partner Eisai who quickly initiated a new trial for the experimental treatment even as Wall Street and neuro experts have effectively declared the amyloid strategy of targeting the toxic clusters in the brain dead, following a spate of failures.
Biogen recorded a spike in first-quarter revenue driven by Spinraza, but Novartis’ $NVS gene therapy Zolgensma is under regulatory review, and competition from Roche/PTC Therapeutics $PTCT oral SMA medicine-in-development risdiplam could inflict some damage to Spinraza’s current monopoly. On Wednesday, Biogen chief Michel Vounatsos dismissed the likelihood that another therapy will push Spinraza off its perch anytime soon, but the company’s shares slipped, signaling a consensus that investors were unconvinced by management’s upbeat tone.
“While the stock appears somewhat discounted…it is hard to make a compelling case for ownership, particularly since many of the foundations of their portfolio face escalating competitive pressures in the immediate future (MS – new orals, patent litigation, CD20 – biosimilars, Spinraza – gene therapy and risdiplam). Biogen’s board and management have still not finally forsworn beta amyloid as a development target, and continue to fund large pivotal trials with their partner Eisai. In the next few months we would expect the company to make final (discontinuation) decisions on these programs, and to severe their collaboration with Eisai and absorb whatever charges, penalties, write-offs and organizational changes such decisions entail,” SVB Leerink’s Geoffrey Porges wrote in a note last week.
Jefferies analysts suggested that in the near term, Spinraza sales may be insulated, despite competition.
“We do think ‘base’ of Spinraza is OK near-term as gene therapy primarily impacts only ‘de novo’ new infants, but new patient share loss impacts the ‘tail’ and oral could also be a preferred option over time particularly for kids/adolescents given no need for spinal tap infusion,” they wrote in a note.