Biogen Pays $60M to Take on Celgene With a Rival Autoimmune Drug

Xconomy Boston — 

It’s unclear if Biogen was one of the unnamed bidders that lost out on Receptos a few months ago. But a deal the Cambridge-based company made this morning for a drug that would directly compete with Receptos sure makes it seem that way.

Biogen (NASDAQ: BIIB) this morning paid $60 million up front for worldwide rights, aside from Asia, to a pill Japan’s Mitsubishi Tanabe Pharma has been developing that could—if all goes well—have use in a variety of autoimmune diseases. The pill, known as MT-1303, has already cleared a mid-stage trial for multiple sclerosis. Biogen aims to move it forward in MS, and also explore its use in inflammatory bowel disease and ulcerative colitis, and “may” advance it to a Phase 3 study in Crohn’s disease as well.

The deal includes $484 million in “bio-bucks,” or, downstream payments tied to a variety of milestones. Mitsubishi can also opt to co-promote MT-1303 for non-MS diseases in the U.S.

The deal is the first strategic move Biogen has made since disappointing sales of its already approved MS pill, dimethyl fumarate (Tecfidera) sent shares spiraling downward. Biogen had been one of biotech’s biggest gainers in 2015 prior to the news. Its executives telegraphed optimism about an Alzheimer’s drug, aducanumab, at a conference in December 2014, and shares climbed from about $300 to as much as $475 apiece when Biogen offered a glimpse of that data in March. Biogen has since lost all of that value, closing its most recent trading day at $308.74.

Dealmaking often offers a solution for sputtering biotechs, however. And while it’s unclear if Biogen was involved in the bidding for San Diego’s Receptos—which Celgene (NASDAQ: CELG) recently bought for $7.2 billion—it wouldn’t be surprising if Biogen were the mysterious “Party B” that regulatory filings disclosed had also been interested in the company, but walked away. Celgene bought Receptos for ozanimod, a pill that—like MT-1303—is also in testing for MS and ulcerative colitis, and acts on a receptor called sphingosine 1-phosphate (S1P). Celgene has bet big on ozanimod, making its largest acquisition since it paid $2.9 billion up front for Abraxis Biosciences in 2010. But it has done so projecting that ozanimod will top out at between $4 billion and $6 billion in yearly sales.

Now Biogen is in on the game. Chief medical officer Alfred Sandrock said MT-1303 “could be a best-in-class S1P modulator.” The battle will play out in clinical trials over the coming years. Celgene expects Phase 3 data for ozanimod in MS in 2017, and the following year for ulcerative colitis. A Phase 2 study of MT-1303 in ulcerative colitis is ongoing, and may wrap up next year, according to RBC Capital Markets analyst Michael Yee. In a note to investors Wednesday morning, Yee considered the deal an “incremental positive” for Biogen given Biogen paid a fraction of Receptos’ buyout price, and the deal helps diversify the company away from other risky programs in Alzheimer’s and MS—like the closely watched Anti-Lingo drug Alex Lash reported on earlier this year.

Still, Evercore ISI analyst Mark Schoenebaum noted that MT-1303 is probably two to three years behind ozanimod in MS, perhaps more in ulcerative colitis, and “there is very little (almost nothing) known in the public domain” about MT-1303—Biogen will reveal some of that information at a medical meeting in October. “We like this deal in that it’s cheap and an obvious strategic fit for Biogen,” Schoenbaum wrote in a note this morning. “However, we obviously need much more data before including it in our model.”