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Steady With a Potential Blockbuster of Blockbusters Down the Road

By Scott Chan on October 16, 2017

Core Growth Portfolio biotech holding Biogen Idec (Nasdaq: BIIB) has gained about 35 percent since the end of May as fears of a generic threat and revenue slowdown subsided. It set a new 52-week high last Friday after weekly sales of Tecfidera (the face of Biogen’s MS franchise) grew 3.1 percent and beat expectations, continuing the drug’s recent comeback.

Tecfidera sales had declined sequentially for consecutive quarters at the end of last year and the first quarter for this year before strongly rebounding. The $1.11 billion quarterly sales in the June quarter marked a 16 percent increase over the previous three-month period and was Tecfidera’s all-time best.

Biogen won a long-running patent suit with Danish drug maker Forward Pharma (Nasdaq: FWP) earlier this year. The U.S. Patent Trial and Appeal Board ruled that Biogen’s patents on Tecfidera are valid, which means that the company doesn’t have to worry about potentially having to pay royalties to Forward in the future.

The two companies had been fighting over patents for the key active ingredient in Tecfidera. Forward had claimed that it filed patents on the ingredient before Biogen did, and hence the latter was violating its patents.

Biogen had bought insurance by paying Forward a $1.25 billion payment in January to license Forward’s patents. And had Biogen lost the suit, as part of that $1.25 billion deal, it would start to pay Forward a 10 percent royalty against Tecfidera sales beginning in 2021. The ruling also keeps Biogen’s Tecfidera exclusivity through 2028, though generic makers could still try to challenge the patent given the attractive Tecfidera market.

Besides the positive Tecfidera developments, Biogen’s new Spinraza drug, which treats spinal muscular atrophy (SMA), a leading genetic cause of infant deaths, has gotten out of the gates very strongly. Second-quarter sales of $203 million were almost three times the market expectation and helped the company raise its guidance for the year.

While a small sliver of the company’s revenue pie, Spinraza’s quick launch raises optimism that the drug could be a faster and bigger contributor than initially believed.

Further down the road, Biogen’s Alzheimer drug candidate, aducanumab, could be the blockbuster of blockbusters. The drug is an antibody that has shown promise that it could reduce amyloid plaques in the brain that are linked to the disease. Nevertheless, even if clinical trials go smoothly, approval is still years away.

In the meantime, Spinraza, which was approved with a full label to treat anyone with SMA (as opposed to only a certain type of SMA patients), figures to be the company’s newest growth driver for the next few years. Look for Spinraza to be another multi-billion-dollar drug in Biogen’s impressive portfolio.

The drug uses genetic-based technology to correct the mutations that cause the usually fatal disease. The success of the early launch shows that physicians and patients are responding very positively to the treatment, which is credited with saving the lives of patients who otherwise would likely have died before reaching two years of age.

Biogen has heavily invested in cutting-edge imaging technology to identify genetic biomarkers in patients and to understand when neurological drugs are working, which is credited with the highly successful Spinraza clinical trials and quick regulatory approval.

Turning back to Alzheimer’s, the disease has proven to be a very difficult nut to crack so far, with multiple drug candidates falling by the wayside. But Biogen is as good as bet as any to finally come up with the Holy Grail.

Never previously done by anyone else, in its clinical trials for aducanumab, Biogen used PET scans to identify patients who had large build ups of amyloids in their brains, but were symptomatically still in early stages of the disease. This narrowed down the test subjects to those the drug was most likely to help, a method that improves transparency and increases the chances for positive clinical data and eventual approval.

Buy Biogen as a blue-chip biotech stock with steady sales growth in the short-to-edium term and a potential world-changing blockbuster further down the road.

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