Biogen is paying $1 billion to enter into a discovery-stage R&D pact with Ionis Pharmaceuticals. The deal gives Biogen a chance to pick up a series of neurological antisense drugs identified by Ionis.
Management at Biogen, facing pressure to re-energize the business, has paid a hefty sum to secure access to the fruits of Ionis’ drug discovery work. The deal features $1 billion in upfront cash. Biogen is paying a $375 million fee and splurging another $625 million on Ionis’ stock at a weighty premium.
In return, Ionis is granting Biogen first pick of its neurology targets. If Biogen takes up its option to exclusively collaborate with Ionis on a target, Ionis will identify antisense drug candidates designed to hit it. At that point, Ionis will hand off responsibility for the program to Biogen and wait for a stream of license fees, milestone payments and royalties to trickle into its bank account.
The arrangement leaves Biogen to do the heavy lifting, operationally and financially. Each step from nonclinical development to commercialization is on Biogen. Ionis’ involvement starts and ends with the identification of candidates.
For Biogen, the deal represents an attempt to replicate one of the bright spots from its recent history, spinal muscular atrophy (SMA) drug Spinraza. The antisense oligonucleotide gave patients with SMA a treatment option and took off commercially, racking up sales of $363 million in the fourth quarter.
Ionis and Biogen’s ability to repeat the trick will rest on choice of targets, a fact that neither has disclosed publicly at this stage. Details should emerge in the near term, though, with the partners aiming to have as many as seven candidates in the clinic within the next two years.
Biogen needs to move quickly to quell concerns about its prospects. Even the success of Spinraza carries on asterisk, with analysts concerned that AveXis’ Novartis-bound gene therapy will supplant it in SMA. Investors were unmoved by Biogen’s play, leaving its stock flat in premarket trading. Shares in Ionis climbed 10%.
The early-stage nature of the deal means it will take years for its merits to become apparent. But the partners sought to paint a promising future for antisense oligonucleotides, talking up their potential to complement gene therapies when given in combination or sequence and otherwise reshape how dementia, neuromuscular disorders and other neurological diseases are treated.
“We believe that this new collaboration will allow us to meaningfully expand our neuroscience pipeline in a way that differentiates Biogen,” CEO Michel Vounatsos said in a statement. “With the large number of diseases that could benefit from Ionis’ antisense platform, we believe that the time is now to build upon our highly productive collaboration with Ionis as we aim to transform the treatment of neurological diseases around the world.”
Jefferies added in a note this morning: "We are favorable on BIIB's long-term pipeline but reiterate it is really a long-term situation as the big Phase III Alzheimer's readout is 1-2 years out, in our view (interim will not stop early if there is one, and the final readout we estimate in 2020) and Lou Gehrig's disease is Phase I/II but early and other neuro programs are mostly Phase II in our view.
"In the short-medium term, clearly based on stock action over last few months and in our conversations w/ investors, Street seems mostly cautious on what happens with MS biz over next few years as organic growth is more flattish overall and Gilenya generic is coming into market later in 2019. So visibility on 2019-2021 growth ex-Alzheimer's is uncertain for investors - and hence lower PE multiple currently applied until further change in the situation.
"So while we appreciate Street wants mid/late stage M&A - we don't see an obviously great deal they can do that would materially change everything and the stock has a big re-rating; we see things like NBIX, SRPT, SAGE, etc., but either BIIB is unlikely to buy it or the fit is not optimal, so we may have to wait for pipeline to readout over longer-term which should be good but will take time (like the sentiment was on BIIB back in 2009-2011 before Tecfidera hit)."