The past few months have been eventful ones for Biogen Idec (NASDAQ:BIIB), as the company awaits the FDA’s decision on BG-12 and continues to build out is pipeline. Last week, Biogen reported new Phase III data for its hemophilia A drug, rFVIIIFc. My last article on Biogen stated that the FDA’s decision to delay its review of BG-12 by 3 months was a buying opportunity, for BG-12, if it is indeed approved, could serve as a catalyst for Biogen to deploy capital in a more aggressive fashion. A review of the rFVIIIFc Phase III data shows that while the results were somewhat disappointing, it will still likely be a profitable new drug for Biogen Idec, and it is a mere precursor to the company’s next major clinical data release: Phase III data of dexpramipexole. In this article, I will provide a review of Biogen’s rFVIIIFc data, as well as a preview of the company’s Phase III data for dexpramipexole.
On October 31, Biogen, along with its partner Swedish Orphan Biovitrum released top-line data from their Phase III trial of rFVIIIFc in hemophilia A. In a vacuum setting, the data was fairly solid, and support filing for FDA approval of the drug. Biogen stated, “median annualized bleeding rates, including spontaneous and traumatic bleeds, were 1.6 in the individualized prophylaxis arm, 3.6 in the weekly prophylaxis arm, and 33.6 in the episodic treatment arm.” Dosing data was also positive, with 30% of patients achieving dosing intervals of 5 days during the last 3 months of the study. The problems arise when those numbers are compared to Phase II data, as well as analyst estimates. ISI stated that the markets were expecting 40%-70% of patients to achieve dosing intervals of 5 days, based on an analysis of earlier data. And as Merrill Lynch noted in its commentary on these trials, this represents a moderate improvement over Baxter’s (NYSE:BAX) Advate, which is currently dosed every 2-4 days (exact dosing is dependent on the case in question). This is why Merrill Lynch trimmed its price target on Biogen from $177 to $173, as the firm feels that rFVIIIFc will no longer be able to garner the market share it had assumed in its prior models. Merrill Lynch cut its global market share estimates for rFVIIIFc to a peak 25% in the United States, and 21% on a global basis, down from a range of 31% to 37%. While rFVIIIFc does have a higher half-life than Advate (at 19 hours compared to Advate’s 12.4), it is unclear whether or not this factor will be strong enough to cement Biogen’s place in the market in light of a more moderate dosing improvement than was expected. Furthermore, this was not a head to head trial of rFVIIIFc vs. Advate, and it does not seem that Biogen Idec will be able to capture the hemophilia A market, estimated to be worth around $5 billion on a global basis, in the same way that it has captured the multiple sclerosis market. Wells Fargo estimates that Biogen will bring in $316 million in annual revenues by 2016 from rFVIIIFc.
However, I see no reason to suggest that rFVIIIFc will not be approved. The drug’s Phase III data showed that it has a good safety profile, with no inhibitor formation or anaphylactic reactions. Bleeding control was solid with 1-2 infusions as well, and this data should be enough for Biogen to receive FDA approval. The company stated that it plans to file a Biologics License Application within the first half of 2013. Due to EMA (European Medicines Agency; the EU’s equivalent of the FDA) regulations requiring the submission of separate clinical data for children, Biogen will file for approval of rFVIIIFc in the European Union when that separate Phase III study is completed. While rFVIIIFc may not be a blockbuster drug in its own right, it will be a profitable new asset for Biogen, and will help fund the company’s research and development of new clinical candidates. With BG-12 nearing the end of its life as a non-commercialized drug, Biogen is shifting focus to its next major drug candidate: dexpramipexole.
Dexpramipexole: A New Standard of ALS Care
The pharmaceutical and biotechnology industries have spent enormous sums of money on over 20 failed treatments for Lou Gehrig’s disease (known also as ALS), which affects as many as 30,000 people in the United States alone. With dexpramipexole, Biogen has come farther than any other company in developing a treatment for this debilitating disease. In Phase II trials, dexpramipexole, which Biogen licensed from Knopp Biosciences in 2010 for $80 million, slowed the progression of ALS by 35%. Biogen’s Phase III trial of dexpramipexole completed enrollment in around 4-5 months, the fastest enrollment time in Biogen’s history, a testament to the urgent unmet medical need for a meaningful treatment for ALS. And if Biogen reports solid Phase III data, dexpramipexole has an easy path to FDA approval. It has already been granted priority review, and when compared with the existing treatment options for ALS, there is little reason to deny approval. In reviewing a company’s NDA or BLA, the FDA takes into account the marginal benefits of a drug, asking itself (as well as the company filing the application), “What new benefits does this drug bring to patients?” To be approved, a drug has to show some sort of incremental benefit over existing treatment options, such as higher efficacy, better dosing, or a better safety profile. Dexpramipexole’s Phase II data turned up no serious safety concerns, and it is the most promising drug for ALS patients, with clearly better efficacy than Sanofi’s (NYSE:SNY) Rilutek, the only ALS drug on the market. Rilutek currently has annual sales of only $50 million in the United States, due to its marginal efficacy in slowing the progression of ALS. Given that dexpramipexole shows a clear improvement in efficacy relative to existing ALS treatment options, I expect that the FDA will approve the drug, if Biogen reports positive Phase III trial data. If approved, sales of dexpramipexole are likely to top $1 billion per year, given the clearly unmet need for an effective ALS treatment. While this may not be a cure for ALS, it offers clear benefits for patients who suffer from ALS, and is an incremental step in the search for a true cure, if indeed there is a cure for ALS. The cause of ALS is unknown in cases where there is no familial history of the disease (only around 5% of ALS patients have a familial history of the disease), so it is possible that one day, a cure may be found. And until that day comes, dexpramipexole will, if approved by the FDA, offer ALS patients a new opportunity to slow the progression of this disease.
A Note of Caution & Conclusions
I continue to believe in the long-term appeal of an investment in Biogen Idec. The company has a number of solid drug candidates in development, and should BG-12 and dexpramipexole be approved, Biogen will have the cash it needs to deploy capital in a more aggressive manner, thereby closing the capital deployment gap between it and its Big 4 biotechnology peers. However, I do want to close with a note of caution. Biogen Idec, as a Big 4 biotechnology company, has much more stability than the average company in this sector. However, as Gilead Sciences (NASDAQ:GILD) has shown us, not even one of these companies is immune from sharp falls. Gilead plunged 14% in February when it announced that the majority of hepatitis C patients in its GS-7977 Phase III ELECTRON trial had viral relapses. Not even the Big 4 biotechnology companies are immune from sharp falls in their stock if they do not post good clinical trial data for compounds that investors are counting on for continued revenue and earnings growth. If Biogen’s Phase III data for dexpramipexole is poor, then its stock will likely fall sharply, as we do not think that most investors have turned their focus away from BG-12 at this point in time. But, once the focus moves to Biogen’s pipeline, dexpramipexole will be what investors focus on, and it will almost certainly have a large impact on Biogen’s stock price. That being said, I continue to believe that Biogen is a core biotechnology holding, and that its recent pullback, from an all-time high of over $157 to under $139 (a fall of over 11%), has presented investors a buying opportunity.