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Timed release: A potential inflection point nears for Biogen

Laurie Halloran sat down with Max Stendahl of the Boston Business Journal (BBJ) to discuss this critical point in Biogen’s evolution. ‘Timed release’ was originally published by the Boston Business Journal.  Click here to read the full article. 

By Max Stendahl, Boston Business Journal

In 1985, a small and unprofitable Cambridge drug research company named Biogen appointed a CEO, James Vincent, with experience commercializing medical products. The move hinted at the startup’s grand ambition to become a household name in the still-nascent biotech industry.

Not long after, the FDA approved Biogen’s first drug, and by 1988, the company turned a profit. Over the ensuing decades, as the company’s multiple sclerosis drugs became best-sellers, revenue and headcount soared. The transformation to multibillion-dollar business was complete.

Biogen in Cambridge, MA
Photo by W. Marc Bernsau | Boston Business Journal

Today, Biogen is in the midst of another ambitious transformation: to become the dominant player in the risky and increasingly competitive field of neuroscience drugs. But the growing pains have been significant. In December, with sales of its multiple sclerosis treatments flattening due to increased competition, Biogen tapped chief commercial officer Michel Vounatsos to replace longtime CEO George Scangos. Four other top executives have stepped down since then, fueling speculation that Biogen could be sold, potentially ending its reign as the state’s largest independent drugmaker (see a full list at the bottom of this article).

Meanwhile, Vounatsos has been spearheading a “strategic review” of the company’s operations. According to a spokesperson, Biogen has brought in McKinsey & Co., the consulting giant known for aggressive cost-cutting recommendations, to assist with the review. The company will announce its plan of action when it reports financial earnings on July 25 in what could turn out to be an inflection point in its three decade-plus history.

“Our focus at Biogen is to transform neuroscience by bringing innovative medicines to patients,” the spokesperson said. “We are working with McKinsey to bring an external and industry-wide perspective confirming our strategic priorities.”

The company declined to make an executive available for an interview to discuss the strategic review prior to the announcement. But with shares of Biogen down nearly 5 percent since the beginning of 2017, investors and analysts are growing impatient. Biogen is a giant in Kendall Square, but less so on the global stage. “They’re a small organization that needs to act like a big organization,” said Laurie Halloran, CEO of Boston-based Halloran Consulting Group, which advises life science firms on business strategies and trials. “And they need to do it quickly.”

Gaps in the pipeline

In the topsy-turvy world of biotech, where blockbuster drugs are continually replaced by new technologies or cheaper generics, commercial-stage companies must constantly evolve — or risk falling behind.

That’s the situation in which Biogen finds itself with its multiple sclerosis franchise, which makes up the bulk of its revenue. Sales of its top-selling drug, Tecfidera, declined in the most recent quarter, and more competition is on the horizon. In March, the FDA approved a Roche drug, Ocrevus, that’s the first to treat a progressive form of the disease. Biogen, which initially helped to develop Ocrevus before handing over rights to Roche, will receive royalties on U.S. sales. But the approval could cut into Biogen’s profit share as patients switch from its drugs to Ocrevus.

Meanwhile, with key patents covering Tecfidera set to expire over the next decade, Biogen has been locked in a series of court battles to protect its exclusivity. In January, Biogen agreed to pay a Danish biotech $1.25 billion and license its intellectual property to settle a case challenging one of the patents. A similar case filed by a prominent hedge fund manager was dismissed in March. More recently, Biogen launched a large-scale preemptive strike, suing more than two dozen companies to prevent them from selling generic versions of Tecfidera before the patents expire.

Biogen has been partly reliant on increasing the price of its drugs to boost sales. But in the age of Martin Shkreli, with insurers and politicians raising alarms over sky-high drug costs, that strategy may not be sustainable in the long run.

“The winners in this field will be the ones who don’t raise their price by more than 10 percent,” Halloran said. “Anyone who does more than that could become a target for being brought out as a bad actor, so to speak.”

Biogen’s most prized asset in late-stage human trials is an experimental drug for Alzheimer’s disease, a notoriously difficult drug target. While the drug has showed promise thus far — and would become an instant blockbuster if approved — Biogen is not expected to disclose data from Phase 3 trials until 2020.

“Once we finally get to early 2020, and we get to open up the envelope, it’s a very risky study,” said Eric Schmidt, an analyst with Cowen & Co., who covers Biogen. “Most of the investors I talk to think it’s pretty close to a coin toss.”

This article continues over at the Boston Business Journal.