First came the blowup of Biogen’s most anticipated pipeline asset, Alzheimer’s drug aducanumab. Then the company’s stock went into free-fall and a shareholder revolt led to the naming of three new board members. Then Biogen revealed it had handed CEO Michel Vounatsos a $2.5 million raise in 2018—an 18% jump over the previous year.
Granted, Biogen was recognizing Vounatsos for his leadership in 2018, when the company recorded record revenues of $13.5 billion, up 10% over the previous year, and aducanumab still looked like a viable product. But the CEO’s raise, detailed in a newly released proxy statement, could be a point of contention among investors who are now demanding that Biogen rethink its pipeline strategy, particularly as it pertains to Alzheimer’s disease.
Vounatsos’ total compensation of $16.2 million places him among the top 20 highest-paid biopharma CEOs of 2018. He ended up well ahead of several Big Pharma bigwigs, including AstraZeneca’s Pascal Soriot ($14.9 million) and Novartis’ Vas Narasimhan ($9.9 million), and neck-in-neck with biotech CEOs Mark Alles of Celgene and Ludwig Hantson of Alexion.
Vounatsos saw every category of his compensation boosted in 2018, including his base salary, up from $1.09 million to $1.28 million, and his stock awards, the value of which jumped from $9.9 million to $11 million.
The CEO was largely awarded for Biogen’s successful global rollout of Spinraza, its treatment for spinal muscular atrophy (SMA). Sales of the product jumped from $884 million in 2017 to $1.7 billion last year.
That said, Biogen’s multiple sclerosis revenues were flat year over year, coming in at $9.1 billion. That was a disappointment considering a key product in the franchise, Tecfidera, surpassed analysts’ estimates in the fourth quarter with sales of $1.1 billion.
The muted performance of Biogen’s MS drugs, coupled with the Alzheimer’s failure, only increases the pressure on the company to revise its R&D strategy. Like many other failed Alzheimer’s drug candidates, aducanumab was designed to reduce the buildup of amyloid plaques in the brain. And that it did—just not enough to slow the progression of memory loss and other hallmarks of the disease.
But Biogen is still pursuing other Alzheimer’s pipeline drugs that target amyloid—a mistake, argued SVB Leerink analyst Geoffrey Porges in a note to investors earlier this week. Investors and the board should vote to deep-six all those programs, he said. That would save the company between $100 million and $200 million a year in R&D expenses, while at the same time “freeing up management’s time and attention for other programs.”
Biogen has been under pressure for some time now to boost its pipeline by acquiring late-stage neuroscience assets, and there’s little chance investors will let up on those demands anytime soon. Unfortunately for Biogen, the company will now have to approach potential deals from a position of weakness, given that its stock has plunged 25% since the start of the year. As Jefferies analyst Michael Yee put it in a note to investors in March, “they will have to now be overly aggressive on M&A due to desperation.”
Meanwhile, Biogen is doing its best to focus investors’ attention on the good news coming from its R&D operation. The company is heading to the American Academy of Neurology meeting in Philadelphia this weekend, where it will present a raft of new data, including results from a Spinraza study showing that infants treated with the product over three years reached major development milestones similar to those children without the disease would demonstrate.
But even Spinraza is facing a looming threat. Novartis is preparing to enter the SMA market with a one-time gene therapy, Zolgensma, which could steal market share from Biogen’s blockbuster. The FDA is expected to issue its approval decision on Novartis’ product this month.