Biogen to spin off hemophilia business

When drug maker Biogen Inc. shed 880 jobs last October, citing slower growth of its industry-leading multiple sclerosis medicines, analysts pondered whether the Cambridge biotech would make a dramatic move to reshape the company for a new era.

They got an emphatic answer Tuesday when Biogen disclosed plans to spin off its growing hemophilia drug franchise, which sells two drugs to treat the bleeding disorder, as a separate publicly traded company.

In essence, Biogen — the state’s largest public company, with a market value of nearly $60 billion — will split itself into two independent businesses.

The move will enable Biogen to focus on its core MS portfolio while it tries to build a new pipeline of treatments for neurodegenerative diseases such as Alzheimer’s, Parkinson’s, spinal muscular atrophy, and amyotrophic lateral sclerosis, known as Lou Gehrig’s disease


Meanwhile, the new company will seek to expand the market for a pair of approved hemophilia therapies — Eloctate, which treats hemophilia A, and Alprolix, which treats hemophilia B — while developing new treatments. Biogen acquired Eloctate and Alprolix through its $120 million buyout of Syntonix Pharmaceuticals Inc. of Waltham in 2007. The two drugs had combined sales of $554 million in 2015, about 5 percent of Biogen’s overall revenue of $10.8 billion.

“We’re creating two world-class companies,” Biogen chief executive George Scangos said in an interview, suggesting both can be more successful under separate management. “These are two fairly distinct businesses. They have different customers and strategic needs.”

The new hemophilia company, which has yet to be named, will be located in the Boston area. It will be led by John G. Cox, currently Biogen’s executive vice president for pharmaceutical operations and technology.

Over the next three months, Biogen executives will work on details of the split, which will give Biogen’s current stockholders shares of the new company. That tax-free transaction is expected to be complete by the end of this year or early next year, executives said.


Cox, who joined Biogen in 2003, previously ran its manufacturing and technical development operations. In an interview, he said the new company would concentrate on differentiating its long-acting drugs in the marketplace and moving new drug candidates forward.

“We definitely would like to be the leader in hemophilia treatments,” he said.

The announcement came as a surprise after a flurry of Wall Street rumors in recent weeks that Biogen would sell its hemophilia drug programs to help fund its research to develop a treatment for Alzheimer’s disease.

The company has one of the industry’s most closely watched experimental drugs for Alzheimer’s, which afflicts an estimated 5.3 million Americans.

Geoffrey Porges, biotech analyst for Leerink Partners in Boston, estimated last month that a sale of the hemophilia business could fetch Biogen more than $6 billion. Scangos acknowledged Biogen executives weighed a number of options before settling on the spinoff.

Investors had a lukewarm reaction. Biogen shares edged up 2 cents to $273.75 on the Nasdaq exchange, a fractional gain on a day when broader financial markets retreated.

Analysts were skeptical of the new structure, pointing out it didn’t generate cash that Biogen could invest in neurodegenerative drug programs. Some suggested it may be just the first in a series of steps that could include a large acquisition to diversify its drug portfolio.

“It’s hard to see a move like this creating or destroying a lot of value,” said Eric Schmidt, biotech analyst at investment bank Cowen & Co. in New York. “My sense is they have a bigger strategic plan and this is one pawn’s move in a large chess game. We don’t know where that game is headed, so it’s hard for me to say if this is good, bad, or indifferent.”


Leerink’s Porges said the spinoff could benefit shareholders but would leave Biogen’s core business more dependent on its multiple sclerosis therapies in the short term.

“The hemophilia drugs are less than 10 percent of its revenue, but they’re the fastest growing part of its portfolio,” Porges said. “Investors have been expecting them to diversify their risks away from the MS therapies. Now instead of 90 percent, they’re 100 percent” of sales.

Biogen’s best-selling multiple sclerosis drugs — Tecfidera, Avonex, Tysabri, and Plegridy — together rang up more than $8.5 billion in sales last year, but their growth has been slowing.

Scangos said it was too soon to project the market value or profit margins of the new hemophilia company, how much it will invest in research and development, or how much debt, if any, it will carry from the current Biogen business.

Those are among the issues that executives will seek to determine over the next few months, he said.

“We don’t know what the value of the new company will be on day one,” he said. “Over time, we believe the value of both companies can be maximized by this structure.”


Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW.