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Barry Cohen
Barry Cohen
Articles (208) 

After Blow to MS Drug, Biogen Needs OK on Alzheimer's Treatment More Than Ever

Approval of Mylan's copycat of blockbuster Tecfidera sends Biogen shares down

Already on the ropes after a recent patent ruling went against it, Biogen Inc. (BIIB) stock could be down for the count if the company's Alzheimer's drug fails to gain approval. Based on what analysts are saying, the odds of that happening appear to be about 50-50.

Shares of the Cambridge, Massachusetts-based biotech traded as high as $295 earlier in the week, but are down about 6% following news that the British generics specialist Mylan (MYL) had received Food and Drug Administration approval to launch its new Multiple Sclerosis drug.

What's problematic for Biogen is that the Mylan treatment mimics the Biogen blockbuster Tecfidera, which brought in revenue of more than $1 billion in the second quarter alone, accounting for about one-third of Biogen's sales. Mylan's is the first oral generic copy to hit the market.

Following the announcement, SVBLeerink cut its 2021 revenue estimate for Biogen from $13.9 billion to $13.1 billion and its earnings per share forecast from $33.30 to $29.80. Other Wall Street firms also downgraded the stock.

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FiercePharma reported that in a note to clients, Jeffries analyst Michael Yee wrote that the introduction of the Mylan drug is a huge concern for Biogen. Tecfidera's performance for 2020 and next year are "now very murky," he wrote, adding that the drug could miss consensus revenue estimates for this year and "could start to go all over the place" in 2021.

Mylan's rolling out its generic even though it faces the possibility of damages should it lose Biogen's challenge in patent court. In June, a federal judge ruled in Mylan's favor on Biogen's claim of patent infringement.

Biogen's other gnawing issue is the status of its Alzheimer's drug aducanumab, which has been on a rollercoaster ride. As I pointed out in an article on Aug. 13, Aducanumab got new life after it was labeled all but dead last October, when Biogen and its partner Easai Co.Ltd. (TSE:4523) said they were stopping phase 3 testing because the drug simply wasn't working.

Shortly thereafter, Biogen changed its mind and said that since additional data showed aducanumab was effective against Alzheimer's: it recently filed for approval and asked the FDA for expedited review. "Clearly what happens on the Alzheimer's front will be the main driver of shares in the near term," said J.P. Morgan (NYSE:JPM) analysts in a note to investors. "How that plays out is one big unknown." And if there's one thing that spooks investors it's the unknown.

In a report on the most valuable drugs in pharma companies' pipelines, EvaluatePharma gave aducanumab a net present value of $5.3 billion, with potential 2026 sales of more than $1.6 billion. However, if aducanumab does prove effective, it could generate revenues well in excess of the forecast given that it would be the first new Alzheimer's disease treatment in more than 15 years.

Some have suggested Biogen could buy some insurance by going the acquisition route, preferably buying a company with some drugs in later stages of development. CEO Michel Vounatsos said during Biogen's first-quarter earnings call that the company is active in the M&A arena, but analysts contend they need to move with greater urgency, especially given the Mylan challenge to Tecfidera.

Disclosure: The author has no position in any of the companies mentioned in this article.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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