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Biogen: No More One-Hit Wonder?

By David Shook At the American Academy of Dermatology meeting in San Francisco in late March, doctors will be bombarded with information and data on five emerging drugs for the treatment of psoriasis. The skin disease is a largely unmet therapeutic area, with a worldwide market estimated to be worth several billion dollars.

Among the five drugs is Biogen's (BGEN) Amevive, which received Food & Drug Administration approval in January. It's the first major new treatment specifically for psoriasis, although Biogen is hoping it may be useful in treating other disorders too.

Indeed, Biogen has high hopes for Amevive. The company has been a one-hit wonder for seven years, relying on Avonex, the No. 1 therapy for multiple sclerosis, for almost all of its $1.1 billion in annual sales. But a competing product from Serono Labs (SRA), Rebif, is likely to take a greater share of the MS market in the years to come. Already, Biogen's profits have begun to sink: Net income in 2002 of $242 million ($1.59 per share, excluding one-time charges), vs. $272 million ($1.84 a share) in 2001.

Biogen could face a similar situation with Amevive. Rivals right behind it include Genentech (DNA), Amgen (AMGN), Johnson & Johnson (JNJ), and Abbott Labs (ABT) -- all of which have competing products in late stages of development or already in use for psoriasis. Nevertheless, Biogen is confident it can easily nab $500 million in annual sales from Amevive by 2006.

BusinessWeek Online's David Shook spoke with Biogen Chairman and Chief Executive James Mullen, a 43-year-old who has held several jobs at the company in his 14 years there, about the prospects for this second major drug. Edited excerpts of the conversation follow:

Q: It has been seven years since you introduced a major product. Does that put greater pressure on you to have Amevive be a success?

A: We're going through the same evolution that virtually every biotech company has had to traverse, as you go from putting your first product on the market to building a fully integrated company that can consistently drive earnings forward with multiple products.

We went seven years between our first and second major product launch. Obviously, that's longer than we would have liked. But we've built a strong commercial infrastructure, and we've carried forward several products in the pipeline.

Amevive is the first product out of that pipeline since Avonex. It represents a nice victory for us, because it's a completely home-grown product that emerged from our labs in the late 1980s.

Q: How does Amevive work?

A: Psoriasis is usually a hereditary disease that occurs when the production of new skin cells happens too fast. There's not enough time to eliminate the dead cells. They accumulate on the skin and turn into plaques.

Amevive is a protein that tries to rebalance the overactive cells. It's like resetting the thermostat on the furnace to get the temperature right.

Q: There have been concerns about the drug exposing patients to infections since it works by blocking the production of certain immune-system cells.

A: Some doctors have expressed concern about the risk of opportunistic infections. But there has been no evidence of serious side effects to this point. There will be follow-up safety studies. We have an arrangement with the FDA that calls for us to continue studies of Amevive on larger populations of patients now that it's on the market. But that's a fairly standard agreement made with the FDA on drugs such as this one.

Q: How big is the psoriasis market?

A: About 4.5 million people in the U.S. have some form of psoriasis. Roughly 1 million have a moderate to severe form. Amevive is now labeled to treat moderate to severe psoriasis. Since the drug hasn't been approved in Europe, the U.S. is pretty much the entire market for now. We are still seeking approval in Europe, but that will probably require more drug trials.

Regardless, the U.S. market alone is quite large. Many patients are discouraged by the disease and treatment options available, which include exposure to ultraviolet light and the use of very heavy immunosuppressant drugs that have significant side effects such as diarrhea, anemia, and mouth sores.

Q: Amevive won't have much of a honeymoon. Several competitors are coming to the market soon. How will Amevive maintain its competitive edge with so little lead time?

A: We expect to see Amgen's Enbrel, J&J's Remicade, and Abbott's Humira all on the market for the treatment of psoriasis. Already, those drugs are on the market and widely used for another auto-immune disorder, rheumatoid arthritis. So this would be an additional indication for those drugs. Then we also expect to see Genentech's Raptiva on the market. So pretty quickly, we're likely to have a five-way competition.

The differentiation for us is the duration of action. All the drugs, including ours, are delivered by injection by a health-care professional. But the other four drugs a patient will need to take constantly. Ours is called "chronic intermittent therapy," meaning that many patients can go weeks or months without using it.

Q: Three years out, what do you expect Amevive to generate in sales?

A: We've talked about it having $500 million in annual sales by the end of its third year. Factored into that estimate is the assumption that we can get at least 8% to 10% of patients on current systematic therapy [the light rays, immunosuppressants].

Q: If you get only 8% of the market, how can you reach $500 million in sales?

A: Generally speaking, Amevive costs about $12,000 for a course of treatment, which lasts 12 weeks. The drug doesn't cure the disease, so follow-up treatments are likely, but the timing of those treatments is at the discretion of the doctor and patient. The disease tracks in a very slow and predictable fashion. So once it starts to return, the doctor and patient can choose when to begin treatment again. It may be many weeks or months.

Q: Biogen's stock frequently whipsaws, sometimes 10% in a given day. Why is it so volatile?

A: It's no big secret that we're a company that has derived pretty much all of its sales from one product, Avonex. And now there's greater competition in that market. While it's already a blockbuster, the fact is Avonex no longer will be a rapidly growing product.

The answer to the volatility is more diversification. And that had to come through multiple products. Antegren, our third product, is for MS and Crohn's disease and is in [late-stage] clinical trials. We're developing that drug with Elan Pharmaceuticals (ELN).

Overall, we're spending close to 33% of our sales on R&D to build the pipeline. And it's starting to pay off. Shook covers biotechnology issues for BusinessWeek Online. Follow The Biotech Beat every week, only on BusinessWeek Online

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