Biogen's Business Update - Analyst Blog

Biogen Idec (BIIB) recently provided an update on its pipeline and "Framework for Growth" program at the J. P. Morgan Healthcare Conference. 

Business Update

Biogen had initially announced its "Framework for Growth" program in November 2010. With this program, Biogen is looking to streamline its operations and increase efficiencies. The program includes initiatives like streamlining of operations, shutting down of facilities, and workforce reduction.

Biogen reported that it has closed its San Diego facility and is consolidating sites in Massachusetts. The company has reduced its workforce by about 13% and expects to realize annual cost savings of about $300 million.

Tysabri Update

In December 2010, Biogen and partner Elan Corporation (ELN) submitted applications in the US and the EU seeking approval for updating the label of their multiple sclerosis therapy, Tysabri. The companies are seeking permission to include anti-JC Virus antibody status as one potential factor that could help stratify the risk of progressive multifocal leukoencephalopathy (PML) occurring in patients treated with Tysabri. A response should be out later this year.

Biogen said that it continues to work on expanding Tysabri's utilization across the world. The company estimates that as of the end of Dec 2010, about 56,600 multiple sclerosis patients were on Tysabri therapy worldwide. The company estimates new patient additions stood at 1,700 in the fourth quarter of 2010.

We note that new patient additions declined on a sequential basis. The company had reported new patient additions of 2,300 in the third quarter of 2010.  With new patient additions declining to 1,700 in the fourth quarter of 2010, we remain concerned that an increase in the number of PML cases associated with the use of the drug could hamper new patient additions.

Pipeline Update

Besides providing an update on Tysabri, Biogen provided an update on its pipeline. Biogen announced that it no longer intends to focus on the development of oncology and cardiovascular products. The company is looking to divest these products/candidates, which should allow it to focus on neurology and biologics instead. Biogen is developing candidates for neurodegenerative diseases like Parkinson's, Alzheimer's and amyotrophic lateral sclerosis (ALS).

Biogen expects to launch five new products by 2015. Key pipeline candidates include dexpramipexole (phase III scheduled to commence for the treatment of ALS), BG-12 (phase III oral multiple sclerosis candidate), daclizumab (phase II ongoing for relapsing multiple sclerosis), and rFVIIIFc (global registrational trial ongoing in previously treated hemophilia A patients).

Biogen is yet to gain EU approval for fampridine for improving walking in patients with multiple sclerosis. The company reported that it received a letter of deficiency in Canada for the candidate.  A response from the EU regulatory authority should be out later this month.

Neutral on Biogen

We currently have a Neutral recommendation on Biogen. Key products, Avonex and Tysabri, should continue contributing significantly to sales. Meanwhile, the company's restructuring initiative should help drive the bottom line. We are also pleased with the company's attempt to streamline its pipeline development and focus on candidates that represent higher potential. However, we remain concerned about an increase in the occurrence of PML in patients using Tysabri. Moreover, we are concerned about the launch of Novartis' (NVS) Gilenya which is competing directly with Avonex and Tysabri.