Morningstar | Despite Aducanumab's Failure, Biogen's Neurology-Focused Portfolio and Pipeline Support a Wide Moat
We think Biogen's specialty-market-focused drug portfolio 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) expired 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. However, pricing power and demand for Biogen's injectable MS portfolio are slightly eroding, now that a generic version of Teva's Copaxone has launched and novel high-efficacy drugs are reaching the market. Oral MS drug Tecfidera had a strong launch and continues to show solid safety and efficacy data. However, continued scrutiny of formulation patents (which have been revoked in Europe and will have an IPR decision on validity in 2020) has led us to assume generic entry in 2021 in the U.S. We do think that Vumerity (licensed from Alkermes) could improve GI tolerability (head-to-head data against Tecfidera is expected in 2019), but this is likely to be only a partial offset, and we assume Biogen's total oral MS drug sales will decline by 20% in 2021. However, Biogen sees significant royalties on Roche's novel high-efficacy drug Ocrevus (approved in the U.S. in 2017 and Europe in 2018) that helps offset 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 (partnered with Ionis) should reach $2 billion in sales in 2019, although competition from Novartis is on its heels. Following aducanumab's failure in Alzheimer's, we think the market underestimates Biogen's pipeline, which includes a continuing partnership with Ionis and drug candidates to treat conditions including stroke, Parkinson's, pain, and ALS.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.
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