Biogen’s answer to Alkermes’ Tecfidera threat? Buy it, but don’t spend too much

Biogen $BIIB has dealt decisively with a potential lukewarm threat from Alkermes $ALKS to its crucial Tecfidera franchise in multiple sclerosis.

They bought it.

In a deal announced this morning, Biogen agreed to pay $28 million to ante up on a partnership on ALKS 8700 that gives the Boston biotech global commercialization rights to the late-stage therapy. That first payout covers Biogen’s share of the research costs in 2017. And Biogen expects to shell out $50 million on the first milestone in the deal before the end of the year. That comes with a deal embedded with $200 million in milestones and mid-teen royalties on any sales.

Richard Pops, Alkermes

That’s not a lot of cash in the world of late-stage drug partnering, which may underscore some of the modest expectations Alkermes’ new drug has managed to inspire thus far.

Alkermes’ me-better pipeline often shoots for new drugs with an improved safety profile. In this case, they were looking for a drug that was just as effective as Tecfidera but with fewer GI side effects.

Alkermes posted some supportive data from a single-arm study a month ago, with a discontinuation rate of only 3.7% over three months, but analysts haven’t always been impressed by the drug’s earning potential.

Leerink’s Paul Matteis looked it over in October and concluded:

(T)he data suggest that ALKS8700 could be an approvable asset that stands to garner some share in the MS market if the necessary marketing support and/or pricing strategy is put behind it. Even if the implied differentiation profile proved to be more modest in a separate, ongoing, perhaps more commercially important head-to-head study vs Tecfidera — “EVOLVE-2” — a small amount of share for ‘8700 in the large MS market category could have meaningful implications for the ALKS P&L.

Alkermes CEO Richard Pops had this to say on Biogen’s behalf:

Biogen has a broad product portfolio and a highly experienced commercial team. In Biogen’s hands, we believe that patients will have broader and more rapid access to this important medicine. Meanwhile, we will focus our growing commercial capabilities on our expanding portfolio of medicines in psychiatry, including addiction, schizophrenia and depression.

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Recursion Pharmaceuticals Salt Lake City, UT
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Atlas Venture Cambridge, MA

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