Biogen Idec Inc (BIIB): Pipeline Offers Several Transformational Opportunities

By: Mani

March 14, 2014 10:36 AM

Stocks: BIIB,





Biogen Idec Inc (NASDAQ:BIIB) has been outperforming for several years from the strength of its multiple sclerosis (MS) treatments -- Tecfidera and Tysabri. Now, the focus is starting to move to BIIB's burgeoning pipeline to sustain, and potentially accelerate growth beyond 2014.



With multiple opportunities for proof-of-concept data and new product approvals across multiple indications, a detailed pipeline review suggests several opportunities potentially larger than Tecfidera emerging over the next several years.



A review of biologic rationale, pre-clinical data, early clinical data and mid-late stage trial design elements suggests reasonable opportunities for success in hemophilia, spinal muscular atrophy (SMA), myotonic dystrophy (DM), secondary progressive MS, Alzheimer's, lupus nephritis and for efforts in remyelination.



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BMO Capital Markets analyst Jim Birchenough said each pipeline opportunity has certain technical risk, but in aggregate, he believes that more programs will succeed than fail, and several opportunities larger than Tecfidera could emerge.



Upside potential beyond current estimates would include commercial success of Plegridy and daclizumab in Relapsing Remitting MS (RRMS) and success of Tysabri in secondary progressive multiple sclerosis (SPMS). The company is also betting on the potential success of ISIS-DMPK-Rx in myotonic dystrophy (DM), and programs for remyelination and Alzheimer's.



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BIIB is developing PLEGRIDY as a q2weekly or q4weekly subcutaneous injection for the treatment of RRMS. BIIB expects US approval in mid-2014 and plans to launch Plegridy in the US during 2014. EU approval is expected in the second half of 2014. The drug is expected to fetch more than $2.5 billion sales.



In addition, Biogen Idec and partner AbbVie (ABBV) are developing daclizumab high-yield process (HYP) in RRMS. BIIB and ABBV have concluded a phase 2b trial of daclizumab HYP in RRMS and expect the readout of phase 3 study in mid-2014.



The Phase 2 data showed a reduction in disability progression, if confirmed in phase 3, it could provide a differentiated claim and could expand the high efficacy segment of RRMS.



Biogen is developing Tysabri for the treatment of the secondary progressive form of MS (SPMS). SPMS is characterized by a steady progression of nerve damage, symptoms and disability. Approximately 35 percent of MS patients have SPMS, and according to the National Multiple Sclerosis Society, approximately half of patients with RRMS will transition to SPMS within 19 years. Currently there is no effective therapy for SPMS.



Birchenough noted that with 50 percent of RRMS transitioning to SPMS about 20 years, expert feedback suggests positive data would broaden the use in both RRMS and establish a standard of care in SPMS. There is an opportunity potentially to double Tysabri peak sales estimates of $2.6 billion to $5.2 billion.



Tysabri was jointly developed by Biogen Idec and Elan. In April 2013, BIIB announced the acquisition of full ownership of Tysabri from Elan, gaining a greater share of profits and full operational and strategic control, as well as eliminating a change of control provision that was part of the original agreement.



The company is developing anti-LINGO as a novel MS therapy under development with the promise of achieving remyelination and neuroregeneration. Anti-LINGO (BIIB033) is currently in two phase 2 proof-of-concept studies, one in acute optic neuritis (data 2014) and one in MS (data second half of 2015). It offers an opportunity for broad use across all forms of MS and as adjunctive therapy alongside $13 billion in MS therapeutics sales.



BIIB is currently developing BIIB037 in a phase 1b proof-of-concept study for Alzheimer's, with expected data readout in the second half of 2014. Opportunity defined by historical estimates for Solanezumab range between $5 billion and $10 billion.



Biogen and partner ISIS Pharmaceuticals (NASDAQ:ISIS) are studying ISIS-SMN-Rx in patients with spinal muscular atrophy (SMA). ISIS plans to advance ISIS-SMN-Rx into phase 3 development in 2014, with a phase 3 trial in infants (type I SMA) commencing by mid-2014, and a phase 3 trial in children (type II SMA) commencing in the second half of 2014. Birchenough noted that opportunity in 60,000 patients estimated at more than $5 billion with peak orphan drug pricing.



The companies are also working on ISIS-DMPK-Rx for Myotonic Dystrophy -- the most common form of muscular dystrophy in adults, with an estimated 150,000 patients in the US/EU/Japan. Human clinical studies to initiate in 2014. Opportunity in 150,000 patients is several fold larger than SMA and is estimated to be another $5 billion plus opportunity.



Meanwhile, BIIB is developing ELOCTATE as a long-acting Factor VIII for the treatment of hemophilia A and ALPROLIX is a long-acting Factor IX for the treatment of hemophilia B. BIIB currently expects the approval of ELOCTATE around mid-2014 and expects its biologics license application for Alprolix to receive regulatory approval in the US in the second quarter.



Birchenough said Eloctate/Alprolix for Hemophila A/B are the first to market long acting factors with 18-month lead on undifferentiated competitors and sees $5 billion plus market for Factor VIII market and more than $1 billion market for Factor IX.



Thus, investors could consider BIIB due to its potential for incremental value creation beyond its current MS franchise.





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