Biogen And The Progress In Multiple Sclerosis Treatment

| About: Biogen Inc. (BIIB)


If the FDA grants approval for the new drug in the next few days, Tecfidera (previously known as BG-12) will become Biogen Idec's (NASDAQ:BIIB) third multiple sclerosis (NYSE:MS) drug on the market in the U.S.

It currently sells Avonex, an interferon that was one of the first treatments for the autoimmune disease, and the newer drug Tysabri. Avonex is given by injection, Tysabri is administered intravenously, Tecfidera would be Biogen's first pill.

Tecfidera is widely viewed as the best in a new wave of treatments. It works by reducing the inflammation caused by the MS immune response and protects nerves against injury.

According to Eric Schmidt, an analyst with Cowen & Co., Tecfidera could generate $3.2 billion in annual sales in 2017.

The US Patent Office just granted a 15-year patent protection for the 480-milligram daily dose for dimethyl fumarate, the active ingredient in the drug, expiring in 2028. Biogen is proposing that patients take two 240-milligram Tecfidera capsules daily.

The company previously held three patents in the US and Europe for the drug's method of treating MS, but those patents expire in 2020. During clinical trials a discovery was made that the drug is effective at a lower dosage than the 700 milligrams given at earlier trials, and the dosing regimen ultimately "qualified as an invention" before the US Patent Office.

"The patent is important because it removes some of the uncertainty about the current patent estate which goes out to 2019/2020 in the U.S.," said Michael Yee, an analyst with RBC Capital Markets. "That's a relatively short timeframe for big blockbuster drugs." The added protection may be worth $10 to $15 a share or more based on a discounted cash flow analysis. A generic drug manufacturer may still try to challenge the patents but the burden of proof will be on the challenger.

The new patent will hold off the entry of generic competition longer than previously anticipated.

Biogen also received a "notice of allowance" for a similar patent in the European Union.


The price of the new drug will be an issue.

According to the annual Drug Trend report, published by Express Scripts, among its members MS therapies were the second most expensive treatment type in terms of spending per member per year. Express Scripts reported a 17.3 percent year-on-year increase in costs for MS treatments.

In light of substantial price increases, third-party payers are increasingly reluctant to reimburse the higher priced MS therapies such as Gilenya from Novartis (NYSE:NVS), according to Bank of America Merrill Lynch analysts. MS drugs as a class appears to be overvalued for the benefit they provide.

Some suggest that Biogen will price Tecfidera below Gilenya. Pricing could be on par with that of Sanofi's Aubagio, which costs approximately $45,000 per patient per year, versus $60,000 for Gilenya.

It has been suggested that if Biogen prices Tecfidera at a reasonable level, that is much lower than Gilenya, then patients will be more inclined to switch to it.

Price could also be dictated by the label that Tecfidera receives from the FDA, which remains to be a question mark until approval. It remains to be seen if Biogen's drug receives a disability claim.

In one Phase 3 study (DEFINE) the progression of disability was reduced for people taking Tecfidera; this effect was not seen in the second study (CONFIRM). In the CONFIRM study Teva's Copaxone was used as an active comparator.


This horrible disease affects the brain and central nervous systems of about 400,000 Americans and 2.5 million people globally.

Multiple sclerosis is a chronic condition that occurs when the body's immune system mistakenly attacks and destroys the protective sheath surrounding nerve cells in the brain, optic nerve or spinal cord. Symptoms may include loss of balance, difficulty moving arms and legs, weakness, numbness and blindness.

The underlying cause of the disease is still unknown. Existing treatment strategies are only partially effective, leaving room for new therapies. A worldwide research effort is ongoing to find out more about the mechanism of the disease.

Johns Hopkins Multiple Sclerosis Center researchers, among others, are probing the question, how white blood cells manage to get into and out of the brain. The influx of these white blood cells into the brain is believed to start the process which leads to MS.

Different types of white blood cells "talk" to each other by releasing particular chemical signals. The way these signals are controlled is very different inside the brain compared to other organs. By understanding how the brain influences this process under normal circumstances, would provide insight into what goes wrong when these signals trigger MS.

The researchers also pay close attention to the actual injury of the nerve cells in MS lesions, not just their myelin coverings which have traditionally been the focus of research.

The John Hopkins people try to understand how these nerve cells are injured and how this injury might be prevented or reversed because the answer could lead to new MS therapies.


Biogen Idec is preparing the groundwork for another application.

In a Phase 3 study, Biogen's longer-lasting injectable multiple sclerosis drug, peginterferon beta-1a, helped reduce the risk of relapse by 36 percent when given every two weeks.

Peginterferon beta-1a, which will be called Plegridy after approval, is an injectable drug designed to reduce the dosing schedule of standard interferon drugs such as Biogen's own Avonex, which are typically dosed at least once a week.

However, analysts expect the market for interferons will shrink over the next decade as newer products, especially pills such as Tecfidera, take over.


In January, Teva (NYSE:TEVA), the generics giant filed a petition with the FDA demanding an advisory committee meeting to inspect what it has called potentially "serious safety risks" with Tecfidera.

After accusing Biogen Idec of posting "unlawful, pre-approval promotion of an unapproved drug product" on the web, Teva also pointed to renal toxicity signs found in animal studies.

Teva, with its $4 billion of Copaxone revenue on the line has a lot to lose.

Teva is playing an end game with its blockbuster Copaxone, boosting prices and revenue as it faces a 2015 patent expiration. So a delay on Tecfidera, for any reason, could be worth a fortune to it.

Teva is also working with its Swedish partner, Active Biotech, on their oral MS drug laquinimod.


In a separate development Biogen bought out partner Elan Corp.'s stake in Tysabri for $3.25 billion in cash plus future royalties.

The deal puts Tysabri marketing rights 100 percent in Biogen hands. Previously the companies had been splitting profit equally on Tysabri, which is Biogen's second-best selling drug.

Investor's summary

2012 revenue and earnings were strong, $5.5 billion, and non-GAAP earnings were $6.53 per share.

Avonex, after years of declining market share, had a turnaround year in 2012 and generated $2.9 billion in sales. The introduction of the Avonex Pen, the first intramuscular autoinjector and the Avostargrip, a titration kit to help reduce the frequency and severity of flu-like symptoms, together with a sales push, gave Avonex new vibrancy.

2012 was also a good year for Tysabri, its worldwide sales were $1.1 billion for the year, up 8 percent. With the availability of the test for JC virus antibodies, Tysabri's use is shifting into the JCV-negative portion of the patient population, and it is getting earlier use in that segment.

Rituxan sales were $1.1 billion. Rituxan benefited from continued patient penetration in non-Hodgkin's lymphoma and adoption in the vasculitis indications.

In 2013 Biogen's revenue is expected to grow at the rate of 10 percent.

Avonex revenue in 2013 is expected to be comparable to 2012, but growth is projected for Tysabri, because it is highly efficient and the new test helps selecting the appropriate patients. The company assumes Tecfidera's approval and projects that over a multi-year period it can become the leading oral treatment in MS.

For 2013 the company anticipates GAAP earnings per share to be between $6.45 and $6.55 and non-GAAP EPS results to be between $7.15 and $7.25.

Biogen's share price ranged from $120.06 to $178.90 in the past 52 weeks, and it hit a record high in March 2013.

Biogen Idec is a global leader in multiple sclerosis drugs and if the new drug is approved and its sales expectations are met, the company's share price is going to do real well.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.