Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

The best part of the lottery is getting to plan theoretical yacht and castle purchases for just a few bucks. You can dream big and not suffer too much when those dreams are dashed. Biogen is in the dashed-dreams phase of the lottery experience, after spending a whole lot more than a few bucks.

Drug development is always a gamble. But Biogen's path is riskier than most, focusing on brain-disease drugs, which carry high payoff potential, but are prone to failure. That proved out Tuesday, when the company reported its drug opicinumab for multiple sclerosis (MS) failed a Phase 2 study, sending shares down more than 13 percent. 

This ratchets up the pressure on the rest of Biogen's pipeline -- particularly its high-risk, high-reward treatments for Alzheimer's -- and on the company to pull the M&A trigger and prove it has ways to grow. It may be time time to restock or retool the pipeline with an aim toward safety or diversification. And it might not hurt to focus on finding a drug that's closer to market, with better odds of success.

A Biogen drug for multiple sclerosis failed a Phase 2 trial, sending the biotech's shares tumbling
Source: Bloomberg
Intraday times are displayed in ET.

Opicinumab is not necessarily dead. Biogen said it still needs to explore the drug more fully, and more data are expected later this year. Still, extra time, risk, and costs have been tacked onto an already uncertain program. 

Biogen was not banking on this drug, which was known to be risky. But this setback removes a potential source of upside for Biogen and highlights the risk of its brain-disease focus. Opicinumab probably isn't a multi-billion-dollar breakthrough drug -- and Biogen's other potential game-changers might not be, either.  This is especially troubling for a company that announced in May it was doubling down on its focus on neurology medicines by spinning off its hemophilia drugs. 

It would also be less worrisome if Biogen's current lineup looked healthy. Its best-selling drug, Tecfidera for MS, is very much a blockbuster -- but less so than it appeared to be just a couple of years ago. Peak sales estimates once approached $9 billion, but a rapid sales slowdown has led analysts to peg the ceiling closer to $5 billion. 

Reality Bites
Analysts slashed expectations for Biogen's Tecfidera after gangbuster 2014 sales growth did not continue to 2015.
Source: Bloomberg

That slowdown is one reason Biogen stock has fallen nearly 47 percent since a peak last March. The company is heavily dependent on MS drugs, an area that will get more competitive as Teva's best-selling Copaxone goes generic. Biogen's sales growth has begun to lag that of big biotech competitors. 

Biogen's year-over-year sales growth is in the bottom half of the big biotech pack. Gilead grew more slowly last quarter, but also booked three times the revenue Biogen did in 2015.
Source: Bloomberg

The company has been on a cost-cutting binge, with R&D and operating costs down 5 percent and 11 percent, respectively, in its most recent quarter from a year earlier. But that's a tough path to maintain, and only gets the company so far if it can't boost the top line. 

Right now, Biogen looks like a big ball of pipeline risk balanced on a slowing drug franchise. The company said on its latest earnings call that it was looking at a variety of potential deals. Sooner might be better. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Max Nisen in New York at

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