Biogen CEO Scangos commits $2.5B to a high-stakes Alzheimer's gamble

George Scangos

How much does it cost to develop a new drug? In Biogen's case, the answer is $2.5 billion.

That's the figure that CEO George Scangos gave to the World Medical Innovation Forum in Boston for its much-hyped Alzheimer's drug, according to Bloomberg's Michelle Fay Cortez.

What does $2.5 billion buy? According to the business news service, it's all-inclusive, covering R&D through two large Phase III studies slated to begin later this year as well as a new manufacturing facility that will be needed to satisfy regulators as the Big Biotech hatches ambitious plans to launch aducanumab (BIIB037) into a market with millions of prospective patients.

Scangos pronounced himself very happy with the results of the early-stage Phase Ib trial involving 166 patients, in which patients in the drug arm demonstrated a slowing rate of decline. If the drug can deliver that result in a small trial, he told Bloomberg, then the drug's benefit has to be substantial.

It's unusual for a CEO like Scangos to publicly commit to a large R&D budget like that or tout early-stage data as a sure sign of future success. But there's a lot riding on the drug, including a hefty $90 billion-plus market cap and a high stock price. On Friday, Biogen ($BIIB) rattled the markets with a major, and rare, miss on Tecfidera revenue. Analysts, meanwhile, have been keen to assign peak sales figures for aducanumab ranging up to a record $14.5 billion, which would add substantially to the company's value. Speculation about a positive gain in the future helped ease the sting of disappointing Wall Street now.

But Biogen also shook up some analysts with its new schedule for releasing final data from its Phase Ib Alzheimer's study. The results for the 6-mg dose will be out in July, but the 10-mg numbers will have to wait until next year, shoving a big catalyst further into the future while raising questions about the delay.

Another point that analysts tend to get lost on is that despite Biogen's initial success with a drug designed to lower levels of toxic amyloid beta in the brain, there's still no consensus over what causes the memory-robbing disease or how to stop it. And over the past decade there's been a near-universal failure rate in the clinic, along with frequent safety issues, as one confident company after the next was forced to concede failure.

Eli Lilly ($LLY) is one of the companies that's furthest along in the amyloid field, pursuing a new Phase III study of solanezumab after its first trial missed. And Merck ($MRK) has been leading the BACE race with a drug that prevents the formulation of amyloid beta, pursuing the same goal with a different mechanism.

Biogen has stirred plenty of high expectations for this drug and will have to stand by its $2.5 billion wager with questionable odds. In the meantime, the company has been executing a group-by-group internal review that has led to at least two small rounds of layoffs, heightening tensions inside a company that has enjoyed huge gains over the past 5 years.

- here's the story from Bloomberg