Biogen Acquires Worldwide License for Alkermes’ MS Candidate (revised)

Biogen BIIB and Alkermes plc ALKS announced a global license and collaboration agreement to develop and commercialize Alkermes’ phase III multiple sclerosis ("MS") candidate, ALKS 8700. Per the deal, Biogen was granted worldwide commercialization rights to Alkermes’ ALKS 8700 for an upfront payment of $28 million. In return, Biogen will pay Alkermes royalties at amid-teens percentage rate on global sales of ALKS 8700.

The deal will be beneficial for both companies as it will reduce costs and bring in a strong partner for Alkermes. Meanwhile,a potential approval will give Biogen a drug bioequivalent to its key oral MS drug, Tecfidera. We remind investors that Tecfidera’s U.S. patient demand is declining slightly due to increasing competition from medicines like Roche’s RHHBY Ocrevus and a slowdown in the overall MS market.

Tecfidera is also expected to face generic competition as early as 2021. A potential launch of ALKS 8700 before this will help Biogen offset Tecfidera’s sales erosion to a certain extent.

Following the announcement Biogen’s shares were up 0.9% on Nov 27. Alkermes also opened up more than 1.5% on Monday, however, it closed down 1.35%. Biogen’s shares are up 9.9% while Alkermes’ shares are down 9.4% so far this year while the industry has gained 1.1% in that period.

Per the terms of the deal, Biogen will bear 50% of the development cost of ALKS8700 for 2017. Beginning next year, Biogen will start bearing full development cost of the candidate and will also pay milestone payment of up to $200 million for various clinical and regulatory achievements.

Currently, Alkermes is responsible for seeking a regulatory approval in the United States.

ALKS8700’s development expense more than doubled year over year and was 12% of total research & development cost of Alkermes in the first nine months of 2017. With Biogen bearing all costs and also responsible for commercialization of ALKS8700 upon potential approval, it will reduce Alkermes’ expenses next year which is expected to boost bottom-line.

A phase III study is currently evaluating ALKS8700 in patients with relapsing form of MS along with pharmacokinetic bridging studies to prove bioequivalence of the candidate to Tecfidera. ALKS8700 has shown lower gastrointestinal side effects as compared to Tecfidera. Alkermes plans to file a new drug application under 505(b)(2) regulatory pathway in the second half of 2018.

Zacks Rank & Stocks to Consider

Biogen and Alkermes currently carry a Zacks Rank #3 (Hold).

Ligand Pharmaceuticals Inc. LGND is a better-ranked stock in the pharma sector which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ligand’s earnings estimates were flat at $2.96 for 2017 and increased from $3.68 to $3.70 over the last 60 days. The company delivered a positive earnings surprise in two of the trailing four quarters with an average beat of 8.22%. The company’s shares have returned 28.1% so far this year.

(NOTE: We are reissuing this article to correct a mistake. The original article, issued yesterday, November 28, 2017, should no longer be relied upon.)

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