R&D Head Ehlers Bows Out As Confidence In Biogen's Pipeline Suffers From Setbacks
Executive Summary
EVP Michael Ehlers swaps public company scrutiny for early-stage, venture-funded opportunities at Apple Tree Partners and Limelight Bio, while CMO and longtime Biogen executive Alfred Sandrock reclaims R&D oversight role.
The news that Biogen is losing research and development head Michael Ehlers at a time when the company's R&D pipeline is struggling to produce wins did not sit well on 1 October when it was announced that long-time Biogen veteran Alfred Sandrock will serve double duty as chief medical officer and executive vice president for R&D going forward.
Biogen's stock closed down 2.4% at $227.20 per share after EVP Ehlers' move from Biogen to Apple Tree Partners was revealed. Ehlers will serve as chief scientific officer and venture partner at the venture capital firm, and he will be the CEO of gene therapy start-up Limelight Bio, an Apple Tree portfolio company. His duties at Biogen will be taken over permanently by Sandrock, who has been with the company since 1988 and served in various R&D leadership roles before being named CMO in 2012.
Wedbush Securities analyst Laura Chico attempted to reassure investors in a 1 October note that the change in R&D oversight should not be a major point of concern. "Dr. Sandrock has been a long-term fixture at BIIB and we feel will keep all R&D efforts on track, with minimal disruption," she wrote.
Jefferies analyst Michael Yee suggested in a same-day note that the loss of Ehlers and doubling-up of Sandrock's roles were not Biogen's biggest problems. Ongoing patent litigation with generic drug makers over the company's top-seller Tecfidera (dimethyl fumarate) for multiple sclerosis and diversification of Biogen's high-risk, high-reward R&D pipeline remain larger issues for the big biotech and its investors, Yee said.
Biogen "has been completely out-of-favor since the Alzheimer's data earlier this year that stunned and disappointed investors, and there has been great debate and frustration as to figuring out what is next and how [the company] can right the ship with regards to confidence around the pipeline," Yee wrote.
Including the failure of amyloid-targeting antibody aducanumab in March and the discontinuation of Phase III studies for BACE inhibitor elenbecestat in September, Biogen's big late-stage bets in Alzheimer's disease were major setbacks for the company and significantly bruised investor confidence in its neuroscience-heavy R&D pipeline going forward.
Yee noted a "more near-term pressing problem" for Biogen than Ehlers' move to VC-backed biotechs is the "significant binary risk" around an inter partes review (IPR) for Tecfidera intellectual property that is being considered by the US Patent and Trademark Office's Patent Trial and Appeal Board (PTAB); a PTAB decision is expected in February. If the IPR goes in Biogen's favor, the analyst said the decision would boost Biogen's stock by 10%-15%, but a negative outcome could lower the company's value by 30%.
Regardless of the PTAB's decision in this and another pending IPR, Tecfidera is expected to lose patent protection in 2020, putting significant revenues at risk without a lot of new products to fill the void. Vumerity (diroximel fumarate), under US Food and Drug Administration review based on Biogen's January filing for approval to treat MS, is being developed as a replacement for Tecfidera. (Also see "Going Generic: Big Brands Poised To Lose Marketing Exclusivity In The US In 2019 " - Scrip, 15 Mar, 2019.)
Tecfidera brought in $2.15bn in sales during the first half of 2019, which was up from $2.07bn in the first half of 2018 and was double the amount of revenue from Biogen's other top three franchises. The company's interferon products Avonex and Plegridy for MS brought in $1.06bn in the first half of 2019, while the spinal muscular atrophy (SMA) drug Spinraza (nusinersen) generated $1bn. Total revenues for the six-month period were $5.56bn, up from $5.28bn a year earlier.
Ehlers' Role In Building Current Pipeline
Biogen has been focused on building its R&D pipeline with later-stage assets and to diversify its portfolio since before the aducanumab setback earlier this year. The company has vowed recently to stay true to its overarching neuroscience expertise, while looking at opportunities in adjacent disease areas. (Also see "Biogen Stays Steady As Alzheimer’s Programs Falter" - Scrip, 24 Apr, 2019.)
However, it has seen setbacks outside of neurological diseases recently as well, including the mid-stage asset BG00011 for idiopathic pulmonary fibrosis. (Also see "IPF Failure Sets Back Biogen’s Diversification Efforts" - Scrip, 17 Sep, 2019.)
Ehlers, who was a neuroscience R&D head at Pfizer Inc. before joining Biogen, has been a proponent of neuroscience as an increasingly investment-worthy area of drug development while at the company. He noted in an interview with Scrip in January 2017 – nine months after taking the R&D leadership role at Biogen – that he joined the company in large part because of aducanumab's potential. (Also see "Neuroscience Reaches A New Inflection Point, Big Biotechs Say" - Scrip, 24 Jan, 2017.)
Ehlers also has been bullish about Biogen's long-term partnership with RNA medicines specialist Ionis Pharmaceuticals Inc., which is where the company sourced its now-blockbuster SMA drug Spinraza. He saw promise in oligonucleotides as being able to address diseases previously deemed intractable. The companies expanded their relationship under his tenure in April 2018. (Also see "Biogen Re-Ups With Ionis In Search Of A Neuroscience 'Innovation Engine'" - Scrip, 20 Apr, 2018.)
Ehlers' decision to venture into the VC realm with Apple Tree is similar to the career move of former Biogen CEO George Scangos, who announced his retirement from the company in July 2016. (Also see "Scangos Leaves Biogen Transformed And Transitioning" - Scrip, 21 Jul, 2016.)
Scangos went on to found the infectious disease-focused start-up Vir Biotechnology Inc. in 2017, which is now pursuing an initial public offering. (Also see "Finance Watch: Here Come The IPOs Again As Bellus Raises $70m And Vir Joins The Queue" - Scrip, 5 Sep, 2019.)
Other notable moves from the big biopharma C-suite to start-ups include former Gilead Sciences Inc. R&D head Norbert Bischofberger's move to newly launched Kronos Bio Inc. in 2018. (Also see "Former Gilead CSO Bischofberger Lands At Kronos As C-Suite Moves To Start-Ups Continue" - Scrip, 24 May, 2018.)
Also, former Amgen Inc. R&D leader Sean Harper retired from the big biotech in mid-2018 and reemerged at the new venture capital firm Westlake Village BioPartners a few months later. (Also see "Finance Watch: Three New Funds, Including Former Amgen R&D Head Harper's Next Venture" - Scrip, 7 Sep, 2018.)