Report
Karen Andersen
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Morningstar | Biogen's Neurology Focus and Strong Pipeline Support a Wide Moat

We think Biogen's specialty-market-focused drug portfolio (multiple sclerosis and cancer) and novel, neurology-focused pipeline create a wide economic moat.Biogen's strategy has its roots in the 2003 merger of Biogen (MS drug Avonex) and Idec (cancer drug Rituxan). Rituxan's market penetration is already high, and patents in the United States (where Biogen derives its profit share from Roche) expire in 2018. However, we think a subcutaneous Rituxan as well as novel antibody Gazyva will allow for extended oncology revenue. Avonex and longer-acting Plegridy generate $2 billion in annual sales and remain the leading MS interferon franchise. Biogen acquired full rights to MS antibody Tysabri (more than $1.5 billion in annual sales) from partner Elan. A diagnostic test can isolate patients with the lowest progressive multifocal leukoencephalopathy risk, which allows the 50% of patients who have not been exposed to the JC virus to benefit from Tysabri's strong efficacy profile with low PML risk. That said, older products like Avonex could see pricing power and demand erode, now that a generic version of Teva's Copaxone has launched and novel high-efficacy drugs are reaching the market. Based on oral MS drug Tecfidera's strong launch and solid safety and efficacy data, as well as the potential of Vumerity (licensed from Alkermes) to improve GI tolerability, we expect Biogen's oral MS franchise to see steady sales around $4 billion. We think Tecfidera's pricing power and demand will remain relatively steady despite oral generics in other classes, and the Alkermes patents could extend protection to 2033. Biogen will also see significant royalties on novel high-efficacy drug Ocrevus (approved in the U.S. in 2017 and Europe in 2018) that will help offset other pressure on its MS franchise. Outside of MS, Biogen has strong human genetic validation for its neurology pipeline, creating potential to offset MS pressure. Spinal muscular atrophy drug Spinraza is launching and could reach $2 billion in peak sales. In addition, early data for Alzheimer's drugs aducanumab and BAN2401 could allow for multi-billion-dollar potential if approved (beginning in 2020).
Underlying
Biogen Inc.

Biogen is a biopharmaceutical company focused on discovering, developing and delivering therapies for people living with neurological and neurodegenerative diseases as well as related therapeutic adjacencies. The company's main growth areas include multiple sclerosis (MS) and neuroimmunology; Alzheimer's disease and dementia; neuromuscular disorders, including spinal muscular atrophy (SMA) and amyotrophic lateral sclerosis; movement disorders, including Parkinson's disease; and ophthalmology. The company's marketed products include TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, VUMERITY and FAMPYRA for the treatment of MS, SPINRAZA for the treatment of SMA and FUMADERM for the treatment of severe plaque psoriasis.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Karen Andersen

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