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Biogen Writes-Off $223M of Aduhelm Inventory
More bad news from Biogen. Why am I not surprised?
Obviously the write-off occurred in “stealth mode” and could initially only be found in the company’s latest Q-10 filing but was later picked up by several websites.
The write-off of the inventory is the direct result of Biogen’s disastrous Aduhelm launch. I think it would be fair to say that Aduhelm’s launch was probably the worst drug launch in recent history. Nothing, literally, was gamed-out properly. Biogen had clearly no viable commercial roadmap for Aduhelm when the drug was approved last year.
The majority of physicians don’t think that the drug provides any tangible value to patients. The efficacy of the drug is questionable at best. In terms of safety, there are two concerns: potential mortality (no link established yet) in addition to amyloid-related imaging abnormalities that seem to go away when dosing is lowered. And obviously the extremely restricted CMS coverage doesn’t help, especially given that most physicians don’t want to put their patients on Aduhelm even in a clinical trial setting.
Biogen obviously had to start downsizing in March thanks to the Aduhelm situation, but the company needs to seriously consider withdrawing the drug from the market and stop spending money on more studies. There is always the chance that with more data the risk-benefit ratio for Aduhelm will be revisited and coverage will become less restricted - but this could take years. In an ideal world Biogen would wait in the hopes of getting better data - but we don’t live in an ideal world.
One recent move Biogen made earlier this year was selling back their stake in the Samsung biosimilars venture. I know this is a minority view - but this was a bad move in my opinion. Why sell one of your main growth drivers - especially in the middle of the Aduhelm debacle? I understand the need for more cash to go shopping around for new assets - and I truly do think that Biogen really needs to bolster up its pipeline with new promising assets - but isn’t the difference in terms of risk between developing biosimilars and taking novel drugs from the bench to the market obvious enough? Biogen needed to take it easy for a while with the “asset gambling” given the tough spot they are in and focus more on growing with an acceptable risk profile.
Not to mention that Biogen was (and still is) in hot waters thanks to Aduhelm, which meant they were not in a position to properly negotiate, hence why Samsung gave them a relatively crappy deal. The Samsung deal clearly shows that Biogen’s current management is more focused on tactical plays than strategic ones. The deal could have been a good move - just under a different set of circumstances and as part of a clear strategic vision.
Biogen has a lot of additional challenges ahead. Management has to most notably adjust and adapt their Tecfidera, Tysabri and Spinraza commercial strategies. The upcoming lecanemab - and Roche’s gantenerumab - readouts are of paramount importance and have the potential to either be the final nail in this entire drug class’ coffin or bring it back to life. Companies developing amyloid directed monoclonal antibodies - I am thinking in particular of Eli Lilly and Roche - are definitely on the lookout and should be ready to make decisive resource allocation decisions. And last but not least, the upcoming FDA decision concerning Biogen’s ALS drug tofersen could significantly impact not only Biogen but the entire ALS space since it could set a new precedent on how the FDA evaluates ALS drugs.
I see potential opportunities for Biogen though thanks to its robust R&D capabilities, both internally and in terms of co-developments, but management needs to learn how to better mercy kill assets with a low success probability early in the process - all in the spirit of fiduciary duty. I think that one asset that has served Biogen’s bottom-line well and that is a testament to Biogen’s R&D platform is Ocrevus. In my opinion the Ocrevus deal with Roche should serve as a template for Biogen moving forward in terms of commercialization.
Biogen needs new blood in the C-suite ASAP. Biogen needs a CEO that is laser-focused on creating shareholder value by replenishing and optimizing both pipeline and portfolio, and eventually thinking about how to make the company a sexy acquisition target.
Roche Appoints Diagnostics Chief Thomas Schinecker as New CEO
Roche’s choice of new CEO makes complete sense and is the logical result of current CEO Severin Schwan’s (who also headed the company’s diagnostics business) diversification strategy and the COVID-19 pandemic.
Severin Schwan’s most impressive achievement was perhaps not the acquisition of Genentech itself but recognizing rather early on that Roche could no longer rely on Genentech oncology assets like Herceptin and Avastin to drive growth due to biosimilar competition - which was a relatively new phenomena at the time.
Schwan’s response to the biosimilar threat was to allocate more resources into non-oncology assets (like Hemlibra and Ocrevus) and into diagnostics. Schwan’s focus on diagnostics could be seen through a string of acquisition that started in 2011 and that most notably targeted: PVT, Verum Diagnostica, Constitution Medical, Bina Technologies, GeneWEAVE, Kapa Biosystems and more recently GenMark. Roche’s diagnostics acquisition strategy was by all standards unprecedented in the pharma industry, and effectively contributed to Roche’s position as a top player in this rather fragmented space. Schwan’s decision to rely on diagnostics as one of the company’s main growth drivers was probably influenced by the fact that he used to head the diagnostics unit himself - but nonetheless was a valid answer to the biosimilar problem.
COVID-19 was a blessing in disguise for Roche Diagnostics - the company got FDA approval for a high-volume coronavirus diagnostic test, and the rest is history.
The pandemic has made the diagnostics market more competitive due to the sheer number of new entrants, both in terms of products and companies. But that doesn’t mean that a lot of diagnostics companies are not rubbish - and by rubbish I mean that these companies have innovative technologies but offer no significant benefits to patients, and therefore will not be widely prescribed/recommended and unlikely covered by insurance. A problem that I see a bit too frequently is that executives and analysts get so impressed by these new innovations - which taints their assessment of the commercial potential of these products.
But all isn’t rosy for Roche. COVID-19 testing volumes have dropped significantly in 2022 and are expected to continue dropping. This would be Thomas Schinecker’s immediate challenge in terms of diagnostics.
On the pharma side of things, Roche’s Lucentis is facing substantial biosimilar erosion that can hurt Roche’s bottom-line.
Gantenerumab is facing a very uncertain future. I can’t say that I am optimistic after the whole Aduhelm debacle. The upcoming lecanemab (Biogen) and gantenerumab readouts can shed some well-needed light on the fate of this entire drug class.
Roche has also had to deal with important setbacks affecting some of its most promising assets in the pipeline: tiragolumab, ipatasertib, and giredestrant. Sh*t happens. Especially in pharma where the majority of trials flop. But in the case of tiragolumab, this could have maybe been avoided. For some reason they convinced themselves that the data they had in NSCLC (non-small cell lung cancer) trials for this asset would act as a surrogate for SCLC (small cell lung carcinoma) and advanced the drug in this indication - but based on the current data it wasn’t a success.
These setbacks have materially changed the risk profile of Roche’s pipeline. Incoming CEO Thomas Schinecker would need to make “derisking” the pipeline his main focus and make striking in-licensing and commercialization deals for low risk - preferably approved - assets one of his top priorities.
ABOUT ME: Clinician turned business strategist and management consultant.
DISCLAIMER: This is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
DISCLOSURE: I have no business relationships with any company that is mentioned in this article.