Is Biogen a Risky Stock?

Following the spinoff of two of its fastest-growing drugs, Biogen Inc. (NASDAQ: BIIB) is more focused on neurological disease than it's been in years. However, the company could face a stiff new challenger in multiple sclerosis soon, and the best drug in its research pipeline is arguably a moonshot. Is Biogen a stock worth buying? In this clip from The Motley Fool's Industry Focus: Healthcare podcast, Kristine Harjes and Todd Campbell discuss what might be next for the large-cap biotech giant.

A full transcript follows the video.

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This podcast was recorded on Feb. 1, 2017.

Kristine Harjes: What about Biogen itself? This wasactually one of Tom's questions directly. He said, "IsBiogen less valuable? Or is it potentially more focused after the spinoff?"

Todd Campbell:I think one of the biggest questions that I have about Biogen right now is actually due to acompetitor.Celgene(NASDAQ: CELG)has been working ona drug that is taken orallyfor multiple sclerosis, and data isexpected in the first half of this year. If that data is good, then theoretically, you have what could be or prove to be a best-in-class solution that reshapes the oral market for MS drugs. And as a reminder, in case you don't follow this company closely, one of the best-selling drugs at Biogen isTecfidera.Tecfidera rakes in about $4 billion a year,and it is the leading oral drug right now. So you have to watch very carefully herein the next few monthswhat comes out of Celgene,because there could be a big threat in 2018 to Biogen's growth because of that drug. So I think it's great to see that Biogen is more focused. But there is a threat there that we need to be aware of,especially since there is not a tremendous amount of news flow expected in 2018 regarding Biogen's pipeline.

Harjes:Exactly. Theydon't have a lot of short-term opportunities to provethat they have more firing power if they were,potentially, to lose market share in MS. The one thing that couldpotentially be a big growth driver for this company is a drug called Spinraza, which was justapproved on Dec. 23 for SMA, which isspinal muscular atrophy. This could be a huge drug.I believe we talked about it on the show. It's priced at $750,000 a year, which is just a mind-blowing price tag. Todd,what do you think the odds are that this drug will succeed?

Campbell:I think the odds are probably very good. There are no treatments for this indication. You get 13,000 new cases a year,about 20,000 people in Europe and the U.S. with the condition now that can be addressed by this drug. Yes,it's not cheap, but I think negotiations will happen. Evenif you take the conservative and say, at $500,000 a year, you don't need a lot of patients to turn this into a $1 billion drug. Now,Biogen is going to have to share some of that inroyalties to the drug's co-developer,Ionis Pharmaceuticals, but this still could be, I think, a nine-figure drug relatively quickly, and potentially a 10-figure drugover the course of the next two or three years. That would be onereally nice piece of upside and would obviously replace a lot of the lost salesfrom spinning off those two hemophilia drugs, which contributed over $800 million in sales last year.

Harjes:Right. Andmanagement agrees with you as well. I will point out that the CEO,on the latest call, said that Spinraza is "Biogen'smost exciting commercial opportunity for 2017." He noted that, in the early part of its launch, thatreimbursement is choppy,but ultimately, this is a necessary drug. The patients have no other options. So I really don't see insurers pushing back much on this price.

Campbell:They'll beslow to roll it out, and I'm surethey're going to try and put some blocks,kind of like we've seenwith some of the other high-priced drugs that have launched. But yeah,I think, ultimately,this is going to be a nine-figure drug or better, and that's going to be, maybe, the brightest spot for the company, as far as the story over the next 12-18 months. Again,the big question is, what's in the pipeline for Biogen further out? What news could be coming? Andwhat's going to happen on the competitive landscape inmultiple sclerosis,and how will that take outas far as market share in the next year or two?

Harjes:Right. Andspeaking of the pipeline,I think there's one drug that,we can't talk about Biogen without mentioning the potential and the opportunity here. This drug is calledAducanumab,and it is still in development, in trials. It's atreatment for Alzheimer's. If you've been following the healthcare landscape, you know this is a heartbreakingdisease to try to treat. These drugs get so close to the finish line, and then they fail, time and time again. So Biogen's candidate targets the same target asEli Lilly's (NYSE: LLY) recently failed drug; the target is calledamyloid. But,there are some key differencesbetween the Biogen drug and Lilly's failed drug that,hopefully, for the sake of patients,and also, I guess, for shareholders of this company, those could be pivotal.

Campbell:Yeah. Biogen'smanagement was asked specifically about this -- how is your drugdifferent from the one that just failed at Eli Lilly? AndBiogen's response was,there are a couple different reasons that are important here. One, Lilly's drughad trouble passing through the blood-brain barrier,and getting to the brain where thoseplaques build up. They claim that their drug, Biogen's drug,does not face that risk, that it does pass through and does reach the brain, andtherefore could becomethe more efficacious in breaking down these plaques that are thought to be behind the disease.

Theother thing that they brought up was that the end point,what the trial was designed to prove is different in their trial versus Eli Lilly's trial. Andbecause they are using a different endpoint thatthey think they have a better chance of delivering the goods on, that this trial may not failin the same way that Lilly's drug failed. Time will tell. We'vetalked about this on the show. Alzheimer's disease is an incredibly important indication,very limited treatment options,nothing that slows disease progression. So, there's a big unmet need. But if you look at the 2002-2012 time period,more than 99% of the drugs that have gone intoclinical trials for Alzheimer's disease have not panned out. So there's anincredible amount of risk associated with this.

Harjes:Right. Hugerisk, but also a huge potential upside. If you are a shareholder of this company, or considering an investment,it's a drug that you'll want to keep your eyes on.

Kristine Harjes has no position in any stocks mentioned. Todd Campbell owns shares of Celgene. The Motley Fool owns shares of and recommends Biogen, Celgene, and Ionis Pharmaceuticals. The Motley Fool has a disclosure policy.