How do you make $8 billion vanish in an instant? One way is to develop a multiple sclerosis drug that doesn’t work as well as hoped.
Just ask Biogen Inc (BIIB) investors, who saw the value of BIIB stock slump 12% after the company reported its opicinumab — a phase-2 treatment for neuron damage in multiple sclerosis patients — failed to meet the trial’s endpoint.
The news knocked off $8 billion worth of the market capitalization Biogen stock was sporting as of Monday’s close.
As is so often the case in these setbacks, BIIB investors are asking what happened, and now what?
Opicinumab Fails
Opicinumab is an investigational, fully human monoclonal antibody viewed as a potential neuroreparative therapy for patients with relapsing sclerosis. It’s a slightly different approach to treating the disease, taking aim at the symptom rather than the cause.
MS has been a tough disease for the pharmaceutical industry to tackle with direct appraises, though, so patients as well as BIIB investors were optimistic.
The specifics: Opicinumab is also known as anti-LINGO-1 drug — an important detail to note. The LINGO-1 protein is overexpressed in multiple sclerosis, and linked to damage of the myelin sheath that protects neurons, or nerve cells.
By suppressing LINGO-1, Biogen believed it could abate the damage it causes to the nervous system. Early trials of the drug supported the theory. Phase 2 of the so-called Synergy trial, however, didn’t meaningfully improve cognitive function or slow the disease’s progression.
Biogen’s chief medical officer Alfred Sandrock commented on the news:
“It is only through taking thoughtful, calculated risks that we can bring major advances to patients. Achieving repair of the human central nervous system through remyelination would be a substantial achievement, and while we missed the primary endpoint, the SYNERGY study results suggest evidence of a clinical effect of opicinumab. Due to the complex nature of the data set, we continue to analyze the results to inform the design of our next study.”
Analysts Pile On
Giving credit where it’s due, RBC Capital Markets analyst Michael Yee arguably had his finger on the true pulse of the Biogen/opicinumab story, explaining after the announcement was made:
“This was one of the most unknown, unpredictable major clinical events investors were trying to do work on. It also reflects the challenging dynamic with the stock for many growth investors in that it is seen as a ‘high risk, high reward’ pipeline company, and it’s hard to get conviction on the events without data despite lots of potential upside if it works.”
In other words, the outcome and response BIIB shares dished out should come as no real surprise.
Still, analysts gave Biogen some rough treatment after the fact. Citigroup downgraded BIIB shortly after the news came out, while Leerink’s Geoffrey Porges and Assaf Vestin opined:
“We are not surprised by the study’s failure as we noted in our initiation note and we did not include opicinumab in our model. Opicinumab certainly had the potential to contribute substantial new revenue to Biogen from RRMS and other potential indications; however, the indication and the biology of this target are challenging. Restoring myelination is one thing, but restoring neuromuscular and cognitive function is another altogether.”
Bottom Line for BIIB Stock
It’s Leerink’s take that really underscores the new tone and 12% stumble from Biogen stock … what might have been. At one point not that long ago, some analysts were suggesting opicinumab could eventually drive more than $10 billion worth of revenue, if it works.
Given that the multiple sclerosis market is poorly served and/or underserved and still manages to generate almost $20 billion worth of treatment revenue per year, it’s not a figure too tough to believe.
Yet, while opicinumab was more than a bit ballyhooed, it’s hardly the only compelling drug in Biogen’s pipeline and portfolio. The company’s already got something of an champion MS drug in Tecfidera, which generated $946 million worth of revenue last quarter on 15% growth.
Not bad for a drug that’s only been in the market since 2013.
Were opicinumab to forge ahead, if approved, it would at least partially cannibalize Tecfidera’s sales. That’s not to say Biogen is better off that opicinumab failed, but it’s not a dire straits situation.
In the meantime, Biogen still has a robust pipeline, with a handful of encouraging phase-3 trials underway. Bogen has also been a steady growth machine. Today’s stumble may be a reason to step in rather than lament.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
