Market Has Overreacted in Biogen

Biogen (BIIB, Financial) was founded in 1978 by a group of highly accomplished scientists, two of whom were Nobel prize winners in chemistry (Walter Gilbert won it for his work in DNA sequencing) and in physiology (Phillip Sharp won it for the discovery of split genes). I have included a timeline of Biogen’s most important events later in the thesis.

The company is currently trading at $256 per share, only $2 away from its 52-week low. I believe Biogen is worth $340 to $360 per share, a potential margin of safety 25% to 30% from today’s trading price. Some of the major reasons for the recent share price decline were an overall decline in the biotech sector, Hillary Clinton comments and not meeting EPS estimates two quarters in a row and lowering guidance. Two of the first causes are temporary and reversible with time; the third is as well, although it might take a bit longer and more effort than the first two. A word of caution: The stock might be volatile going forward, at least in the short term, thus it is not suitable for the conservative/defensive investor at the present moment.

Biogen derives the vast majority of its revenues from three multiple sclerosis products:

1. Tecfidera (40.2%)
2. Interferon (31.4%)
3. Tysabri( 21.1%)

Tecfidera sales have slowed down recently, as a result of one MS patient who was taking Tecfidera developing progressive multiple leukoencephalopathy and dying as a result. This case prompted Biogen to introduce warnings on its drug label, in addition to contributing to diminished doctor confidence. With that being said, complications like that, with the dying patient, have been very rare, and I believe the market has overreacted in this matter. As there is no indication to the contrary, I believe that Tecfidera, Interferon and Tysabri will continue to be strong products for the foreseeable future.

Here are some highlights of its history, from company’s own website:

1979

• Biogen scientist Charles Weissmann, M.D., Ph.D., announces that he has successfully cloned biologically active human leukocyte (alpha) interferon. Biogen grants worldwide license to Schering-Plough for the interferon alpha.
• Biogen scientist Kenneth Murray, Ph.D., synthesizes bacteria of hepatitis B virus protein antigens.

1985

• Silicon Valley venture capitalists join forces with research scientists to establish IDEC Pharmaceuticals in San Francisco. The goal is to develop and commercialize monoclonal antibodies.

1986

• With approval from the United States Food and Drug Administration (FDA), Schering-Plough begins sales of INTRON® A (interferon alfa-2b), the first Biogen-developed product brought to market. INTRON® A is a treatment for leukemia.
• Biogen establishes its first manufacturing facilities.

1989

• Biogen announces FDA approval of a recombinant hepatitis B vaccine from SmithKline Beecham (now GlaxoSmithKline). The vaccine used technology licensed from Biogen.

1993

• Murray is knighted for his discovery of hepatitis B antigens.

1996

• Biogen announces FDA approval of AVONEX® (interferon beta-1a) for the treatment of relapsing forms of multiple sclerosis (MS). It is approved in the European Union one year later.

1997

• The FDA approves IDEC’s RITUXAN® (rituximab) for certain types of B-cell non-Hodgkin’s lymphoma. This is the first monoclonal antibody therapy to be approved for a type of cancer. The FDA eventually approves RITUXAN for treatment of rheumatoid arthritis, granulomatosis with polyangiitis (Wegener’s granulomatosis), microscopic polyangiitis and chronic lymphocytic leukemia.

2000

• Biogen introduces MS ActiveSource®, a comprehensive support service for multiple sclerosis patients and caregivers.

2003

• Biogen breaks ground on a new manufacturing facility in Denmark.
• Biogen and IDEC merge, creating Biogen Idec.

2004

• The FDA approves TYSABRI® (natalizumab), a monotherapy for the treatment of patients with relapsing forms of multiple sclerosis.

2005

• Biogen Idec and collaborator Elan Pharmaceuticals voluntarily remove TYSABRI® (natalizumab) from the market after the emergence of one confirmed and one suspected case of a serious side effect called progressive multifocal leukoencephalopathy, an infrequent but serious brain infection that leads to death or severe disability.

2006

• After Biogen Idec’s exhaustive re-evaluation of TYSABRI® (natalizumab) and review by an FDA Advisory Board, FDA reapproves TYSABRI for marketing, and the therapy is reintroduced in the U.S. and released in the European Union with a warning for PML.
• Biogen Idec acquires Fumapharm AG. This European company developed the technology that eventually led to the approval of TECFIDERA® (dimethyl fumarate), a therapy for relapsing forms of multiple sclerosis.

2007

• Biogen Idec acquires Syntonix Pharmaceuticals, which eventually leads to the development of two hemophilia therapies.

2009

• Biogen Idec receives a license from Acorda Therapeutics to commercialize Fampridine outside the U.S. In 2011, Biogen Idec received European approval for Fampridine, now called FAMPYRA®, as a treatment for the improvement of walking in adult multiple sclerosis patients.

2010

• Biogen Idec refines its business strategy by focusing on new therapies in neurology, immunology and hemophilia.
• The FDA approves RITUXAN® (rituximab) plus chemotherapy for treatment of chronic lymphocytic leukemia.
• The company enters into a licensing agreement with Knopp Neurosciences, which brings in dexpramipexole, a compound that the company investigates for treatment of amyotrophic lateral sclerosis.

2011

• The AVONEX® PEN™ (interferon beta-1a) is launched in the European Union and Canada. It will be approved in the U.S. the following year, along with AVOSTARTGRIP®. These products offer dosing innovations to multiple sclerosis patients.
• Biogen Idec business development executes deals with Portola Pharmaceuticals, on oral therapy for autoimmune diseases, and with Samsung Biologics on biosimilars to form a joint venture now called Samsung Bioepis.

2012

• Biogen Idec helps to create a new research consortium to identify new approaches to treat amyotrophic lateral sclerosis.
• Biogen Idec collaborates with the National Hemophilia Foundation, the American Thrombosis and Hemostasis Network, and the Puget Sound Blood Center on a nationwide program that offers free genetic testing to people with hemophilia and their families.
• Biogen Idec announces a collaboration with Isis Pharmaceuticals to identify new approaches in treating spinal muscular atrophy, myotonic dystrophy type 1 and neurological/neuromuscular disorders.
• The company acquires Stromedix, a biotechnology company focused on innovative therapies for fibrosis and organ failure.

2013

• Biogen Idec announces disappointing Phase III results for dexpramipexole, which is being investigated for treatment of amyotrophic lateral sclerosis. The study revealed that dexpramipexole does not slow the progression of ALS.
• TECFIDERA® (dimethyl fumarate), a new oral therapy for relapsing forms of multiple sclerosis, is approved in the U.S., Canada and Australia. It will be approved in Europe a year later.
• Biogen Idec completes its acquisition of all rights to TYSABRI® (natalizumab) from Elan Pharmaceuticals International Ltd., an affiliate of Elan Corporation (ELN, Financial).
• The FDA approves GAZYVA® (obinutuzumab) for chronic lymphocytic leukemia. Biogen Idec collaborated on GAZYVA with Genentech, a wholly owned subsidiary of Roche Pharmaceuticals.
• New collaborations include agreements with Galapagos NV (GLPG, Financial) subsidiary BioFocus on treatment for the autoimmune skin disease scleroderma and with Isis Pharmaceuticals on therapies for neurological disorders.

2014

• The FDA approves ALPROLIX® [Coagulation Factor IX (Recombinant), Fc Fusion Protein] (for hemophilia B) and ELOCTATE® [Antihemophilic Factor (Recombinant), Fc Fusion Protein] (for hemophilia A) — the first new treatment advances for these diseases in nearly two decades.
• PLEGRIDY® (peginterferon beta-1a) is approved by the FDA for the treatment of relapsing forms of multiple sclerosis (MS) and in the European Union for relapsing-remitting MS.
• The company finalizes collaboration agreements with Sangamo BioSciences on therapeutics for hemoglobinopathies and with Eisai to jointly develop and commercialize therapies for Alzheimer’s disease.

2015

• Biogen acquires U.K.-based Convergence Pharmaceuticals, a clinical-stage biopharmaceutical company, adding to its portfolio of pipeline candidates for neuropathic pain.