Biogen is putting greater emphasis on its ambitions in eye and immune system diseases, likely in response to investor concerns over the company's high-risk neuroscience pipeline and the recent setback of its star drug.
While presenting second quarter earnings Tuesday, executives detailed how the biotech is widening its focus to include ophthalmology and immunology, supported respectively by the recent acquisition of Nightstar Therapeutics and Biogen's two experimental lupus treatments.
R&D head Michael Ehlers said immunology is now considered an emerging growth area for the company, while ophthalmology joins its list of core therapeutic areas alongside multiple sclerosis, movement disorders and neurodegenerative diseases.
"We are working diligently to re-balance the risk profile of our pipeline, leading us to prioritize the areas we believe have the greatest probability of success and highest potential return," CEO Michel Vounatsos said during a call with investors.
Biogen has been under intense pressure to diversify its business since March, when the company cut short a pair of late-stage studies testing aducanumab, its most advanced Alzheimer's disease drug.
Despite having more than two dozen other experimental therapies in its arsenal, the bulk of Biogen's pipeline value — at least from Wall Street's perspective — stemmed from aducanumab. The drug's failure knocked down the company's market cap by $20 billion, though it has since rebounded a few billion dollars.
Executives said they're still poring over the data from those late-stage trials, which has left shareholders unnerved about a couple other Biogen drugs that attempt to treat Alzheimer's in a similar way as aducanumab.
The concerns extend beyond Biogen's pipeline too.
On the commercial side, the biotech's largest source of revenue faces generic challengers. In February, the United States Patent and Trade Office determined that Mylan has a "reasonable likelihood of success" proving at least one claim from a key patent protecting Tecfidera, a multiple sclerosis drug that raked in nearly $4.3 billion for Biogen last year, is unpatentable.
That problem, however, may be getting resolved. Evercore ISI analyst Umer Raffat noticed a few companies developing Tecfidera generics have withdrawn their abbreviated New Drug Applications, which spurred him to ask whether Biogen had reached some kind of formal settlement. Biogen leadership declined to comment, aside from saying there is "a lot of interest" in getting those intellectual property disputes resolved.
In any case, Biogen expects to launch a Tecfidera follow-on drug, Vumerity, in the fourth quarter
Elsewhere, the market for Biogen's main growth driver, a spinal muscular atrophy treatment called Spinraza, is becoming more crowded. Novartis just launched a gene therapy for the disease, and Roche isn't far off from filing an oral option for approval.
Biogen executives said they haven't seen much of an impact since the Novartis therapy, Zolgensma, launched. However, second quarter Spinraza revenue of $488 million fell about $30 million to $40 million below what Wall Street expected, mostly due to a quarter-over-quarter decline outside the U.S.
Ionis Pharmaceuticals, which partnered with Biogen to develop Spinraza, saw its stock drop 9% by late morning Tuesday.
Offsetting the Spinraza miss was Biogen's multiple sclerosis business, which beat analyst forecasts with revenue of $2.4 billion. There, Tecfidera was a bright spot, achieving a 6% year-over-year increase.
Overall, Biogen reported $3.6 billion in revenue for the quarter. The company raised its 2019 revenue guidance from the range of $13.6 billion to $13.8 billion to the range of approximately $14.0 billion to $14.2 billion.
While the company anticipates 10 mid- to late-stage readouts before the end of next year, including in those new focus areas like choroideremia and lupus, executives underscored that they will continue to be conservative with how Biogen spends money. To that point, they decided not to initiate Phase 3 trials for one investigational drug, vixotrigine, in trigeminal neuralgia this year, though they said they will continue to prepare for a potential late-stage initiation next year.
Biogen also appears conservative on the M&A front, with executives saying they are most interested in late-stage assets that have a more proven track record in the clinic.
Shares in the big biotech were up 4% around noon, trading at $242.32 apiece.