Biogen investors have plenty to worry about after aducanumab’s failure, $5B buyback or no

After the aducanumab failure, Biogen will be distracted by “a mixture of recriminations, explanations, negotiations and possibly terminations and litigation,” SVB Leerink analyst Geoffrey Porges predicts. (Biogen)

Biogen knows shareholders are agitated; after all, its shares took a nosedive last week when its Alzheimer's disease hopeful aducanumab flopped a phase 3 trial. So it's offering up $5 billion in buybacks to persuade them to stick around. 

Will it work, though? So far, investors aren't all that impressed. Shares climbed slightly Monday after Biogen rolled out news of the $5 billion buyback plan, which its board added to an existing $1.7 billion program unveiled last August. Shareholders may well be too worried about Biogen's pipeline—and, some say, its management—for a repurchase plan to sway their thinking.

Biogen put a lot of hope into the Alzheimer’s basket, not just because of the huge market opportunity and unmet medical need, but also because it needs an impressive growth driver in the not-so-distant future, when blockbusters Tecfidera and Spinraza face patent cliffs and new challengers. And that patent-cliff future for Tecfidera could be much closer than Biogen had anticipated, thanks to an IP challenge that, if successful, would open up the multiple sclerosis blockbuster to generics as soon as this year.

With the aducanumab flop, which wiped more than $18 billion off of Biogen's market value last week, it would be natural for shareholders to question management’s judgment and worry about its other pipeline prospects.

“For the immediate future investors are unlikely to be willing to underwrite the uncertainties in the rest of the portfolio,” SVB Leerink analyst Geoffrey Porges wrote in a Friday note to clients. Specifically, Porges questioned Biogen’s life cycle management for Tecfidera, and considered “the rest of the pipeline as either too risky to have confidence in the outcome, or too early and narrow to justify much value.”

RELATED: Where can Biogen turn after mammoth Alzheimer's blow? The M&A table, analysts say

A key patent that protects Tecfidera to 2028 is under challenge by Mylan via inter partes review at the U.S. Patent and Trademark Office. Without that patent, Tecfidera would lose protection this year or next year, Porges previously noted.

Meanwhile, its fast-launching spinal muscular atrophy drug Spinraza, which generated $1.7 billion last year, faces imminent threat from Novartis’ gene therapy Zolgensma. That one-time treatment is up for approval this year, and Novartis has argued that it's more cost-effective than the Biogen drug, which lists at $350,000 per year after a $700,000 first-year treatment round.

“We see no reason to recommend Biogen’s stock even at these levels given what looks like a challenging road ahead, with several near-term risks to the key Tecfidera and Spinraza franchises,” Porges said in his Friday note.

One “responsible decision” Porges thinks the company should take is to cut losses and move on. Specifically, “to terminate all further investments in beta amyloid-directed medicines, and saves their investors the cash and saves patients and investigators from the burden of such studies.”

But that hasn't happened, at least not yet.

RELATED: 1 day after aducanumab disaster, Eisai kick-starts backup Alzheimer’s drug trial

The theory that targeting misfolded beta amyloid protein in a patient's brain could slow the worsening of Alzheimer's has so far yielded no late-stage success. But seemingly undeterred by past failures, Eisai on Friday said it had started a phase 3 on another amyloid antibody, BAN2401.

The drug is also covered by the Biogen-Eisai partnership, formed in 2014 and tweaked in 2017. But unlike previous announcements that bear both companies' names, Eisai put out the latest BAN2401 release on its own, triggering speculation that the collaboration may be in jeopardy.

Several analysts, including Jefferies’ Michael Yee and RBC Capital’s Brian Abraham, have suggested Biogen may consider doing M&A to dig itself out of the aducanumab hole.

Porges, however, suggested that Biogen’s board won’t “have the latitude to immediately pivot to major acquisitions that would alter the company’s outlook materially.” He said the company will be distracted by “a mixture of recriminations, explanations, negotiations, and possibly terminations and litigation.”

Biogen in fact, just recently struck an M&A deal, snatching up gene therapy specialist Nightstar Therapeutics for $877 million. That biotech’s lead candidate, MSR-REP1, is set to finish enrolling choroideremia pateints in a phase 3 trial in the coming months.

After the aducanumab failure, Jefferies adjusted its Biogen price target from $341 to $247.