Speaker 1:
Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
Phil Nadeau:
Hi, I am Phil Nadeau, biotech analyst at TD Cowen. We're here at the 45th Annual TD Cowen Healthcare Conference, and I'm with Chris Viehbacher, the CEO of Biogen. Chris, welcome back to the TD Cowen conference. You were brought in to Biogen to really turn around the organization. Can you give us your idea for the vision for Biogen over the next five years? How will the company create shareholder value?
Chris Viehbacher:
Thanks, Phil. It's great to be here at the conference and be with you for the podcast. I started two and a half years ago. The history of the company was such that we knew that the Multiple Sclerosis franchise was going to be under an awful lot of competitive pressure, but the thinking of the company was that we had these great assets in Alzheimer's, first Aduhelm, and then Leqembi. And the size of those markets was such that those products would really carry the day. The company could then afford to really invest in neuroscience. And by the way, we also had a Sage product for major depressive disorder that was going to be big. So, as we went into 2023, we found that things didn't quite work out that way. The off take of Leqembi has been very solid progress, but not anywhere near what certainly the market was expecting.
And of course, the Sage product did not get approval. When I started looking at the pipeline, became pretty clear that there had been an awful lot of risky bets and none of those things really seemed that was at least advanced was going to pick up the slack. So, we started looking at M&A and I thought, "Well, this is going to have to be what we did at Sanofi and we'll have to go buy ourselves a future." And we started looking at that. But over the course of 2024, we started to get some really encouraging data on some of the assets that we'd really decided to prioritize. We had Dapirolizumab, for example, for lupus, very positive phase three results. And lupus is a market where there's at least 5 million patients around the world. And then we also have a second product in there called Litifilimab, which is a homegrown asset.
And we were becoming increasingly confident in those data and we just at the beginning of this year, did a financing with Royalty Pharma. And in addition to the financing, what I value was Royalty Pharma's diligence. They went and looked at deep at that product. Royalty Pharma people are very, very smart people and they don't normally finance things that they don't believe in. And in R&D it's so easy to fall in love with your own product, so for me, that was a nice source of validation. So suddenly saying, "Hey, we've got a nice lupus franchise starting off here." Second is we did a lot of work with our ASO for Tau, and Tau is something that really excites neurologists in Alzheimer's. They really believe that this could be something even more transformative than an amyloid beta. And we were able to redesign the phase two result to accelerate that result so that we'll have data on efficacy, safety, and dosing by the end of next year.
And if that really plays out the way we think we do, we really have a very strong franchise. Alzheimer's is potentially a huge market, 500,000 newly diagnosed patients. This could be a market the size of oncology when you look at the numbers of patients. Then we did the acquisition of high bio. These are the types of assets that you really want to see in your pipeline. Very solid phase two results. You don't need five years typically to do the clinical trials in phase three, high unmet need and clear differentiation amongst those assets. And so we started looking at what are the peak sales of all of these things? And it turns out if everything worked and not everything will work out clearly, but if everything did, we were looking at one and a half to two X our current business.
Now, there's not many companies in our business can point to its pipeline and say, "We can not only replace but even enhance the growth." So, at that point we started to say, "Well, let's really focus then on execution." Really get the four products we launched last year, going even stronger. Let's really not only get the products to market, but let's really start a pre-commercialization effort, a pre-launch effort for those products. Really dig deep into the insights that we can gain for lupus and rare kidney disease and Alzheimer's. And then we'll continue to use our capital on increasing the growth substrate in BD.
Phil Nadeau:
Maybe to dive into two of those points in a bit more detail, first on the current product portfolio and pipeline, you've guided that revenue is going to decline by mid single-digit percentage in 2025. So, investors are keenly focused on when Biogen could return to growth. Do you think your current pipeline and product portfolio is sufficient to return Biogen growth? Can you give us some sense of what path Biogen will follow to get the top line increasing once again?
Chris Viehbacher:
Well, it's going to take a little time to really get back to growth, but I don't really see us necessarily declining much either. We have over the last five years lost about $700 million on average per year of top line due to the decline of RMS portfolio. We're down to about 4 and a half billion dollars of revenue and about 2 and a half billion dollars of profit left. If I just extrapolate from the trends that we have seen, maybe we lose half of that over the next five years. And in that, by the way, I'm including the Ocrevus royalties in that part of the business. So, that's the gap. Now we've got new product launches and last year we were able to offset the decline in the MS portfolio. This year we've got a little bit more headwind, because we've got the IRA Medicare tax in there, and we also have currency with the Euro.
And that's why the guidance is a little prudent to start. But I think we can pretty much stay more or less even where we are over the next two, three years and possibly get to growth if we can really get an acceleration on Leqembi. There are a number of catalysts on Leqembi that could potentially cause us to see an acceleration next year. So with that, we think with the pipeline and starting to turn over cards, we start to grow, certainly by the end of this decade and certainly start launching products as early as 2028.
Phil Nadeau:
What's Biogen's thinking on business development? What assets would be most complementary to your current portfolio and what therapeutic areas, maybe stages of development are of most interest?
Chris Viehbacher:
So, it's rare diseases in I & I. I & I that is probably more neuro-focused or rare disease focused. So, you could take the high bio assets as an example of that. That's I & I, but it's also rare, and that's the sweet spot for Biogen. I think the scientific level at Biogen is impressive, and I think we know how to sell high value, low volume products with a high science sell. We're not necessarily going to build massive field forces to go see primary care and those two areas give us a little diversification from the neuroscience. Neuroscience is still going to be a major part of the business with Alzheimer's and ALS, but I think we were looking at areas where the disease biology is better understood, and the clinical trials not quite so risky or so long.
Phil Nadeau:
You've been in the C suite of the biopharma industry for a long time. What are the most striking ways in which the industry has changed over a decade and what are the most important ways in which it hasn't?
Chris Viehbacher:
So clearly, the science has really changed. When I started in this industry, it was dominated by small molecules, and we've gone to biotech and now you look at the level of biomarkers, the genetic understanding we have. New technologies like CRISPR and gene editing and cell therapy. These are all things that could really revolutionize healthcare over the next 20 years and have increased the scientific sophistication. And of course, with this, increasingly we get to more targeted populations. So, when I started years ago, we were looking at broad populations, and increasingly now we have very targeted populations. That has had a side effect though, and that means that the treatment cost per patient goes up. When we were developing statins, you could amortize the cost of R & D over large populations. And today we have to do that over a much smaller base. And that of course attracts an awful lot of attention that can lead to higher co-pays and criticism of pricing. So, that's one change.
Another, of course, is the high concentration of the PBMs. The PBMs were originally designed to just negotiate pricing for insurance companies, but now they control 1000s and 1000s of physicians, pharmacists and have really started to drive an awful lot of control over the pharmaceutical market, and so much so that for every dollar spent on medicines, we as an industry, the people who actually research and develop and manufacture medicines only get 48 cents. No other country is the same. Most other countries were getting at least 90% of the revenue of pharmaceuticals. And there is an awful lot of effort to try to reign that in, because when people pay for medicines and think about the pricing, it's largely the co-pay. And that's largely determined by PBMs.
Now what hasn't changed is the cost of doing research and development and there I think we have to get a lot more efficient and tools like AI can help. They can help us doing basic research in terms of molecule optimization. They can help in terms of finding patients. When you think about doing a 400 patient study, you're probably going to look for 450 sites. We got to be a lot more efficient how we do clinical development, because society is starting to say, "How much can we really afford on innovation?" So, that's why I think we have to get a lot more efficient and be a better use of technology. The whole healthcare system is often one of the slowest to adopt new technologies.
Phil Nadeau:
Great. Well, thanks for coming to TD Cowen's 45th Annual Healthcare Conference and thanks for stopping by the TD Cowen Insights podcast.
Chris Viehbacher:
Great to see you, Phil.
Speaker 1:
Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.
