Alzheimer’s is Biogen’s top challenge, new CEO says
The incoming chief executive of Biogen Inc. told stock analysts Tuesday that he’ll conduct a review of the company’s operations with the aim of strengthening its pipeline of drugs in development, and he called efforts to find a treatment for Alzheimer’s disease the Cambridge biotech’s “number one challenge and opportunity.”
Michel Vounatsos, who will take over Jan. 6, said he’ll outline his vision when the review is completed over the next few months. While he said he wants to invest in the company’s research efforts and its people, he also hinted at broad changes — including leadership changes – but stopped short of offering specifics.
“A new CEO has to build his team,” Vounatsos said in his first conference call with analysts.
Vounatsos, 55, who joined Biogen as chief commercial officer in April, made it clear he wants to expand Biogen’s roster of drug candidates through partnerships with other drug makers and acquisitions of drug development programs — and, possibly, by buying other companies. But he provided no details about companies or drug development areas that Biogen, the world leader in multiple sclerosis medicines, might be considering.
“The pipeline is never good enough,” he said. “We are obviously interested in bolstering the pipeline at all stages with high-quality products. We’ll look early stage and later stage, and eventually broader.” That could include branching out beyond Biogen’s traditional focus on neurological diseases.
Analysts said acquiring late-stage drug candidates is important to the company’s continued success. That’s because after the anticipated US approval of Biogen’s Spinraza — expected to be marketed in coming months as the first treatment for spinal muscular atrophy — no drug approvals are on its horizon until after 2020. That’s when the company’s lead drug candidate for Alzheimer’s is expected to be reviewed by regulators.
“If they want to launch anything else in the next few years, they’ll have to buy something,” said Salim Syed, senior biotech analyst at the financial firm Mizuho Securities USA Inc. in New York.
Biogen’s most likely takeover candidates would be mid-size biotechs developing drugs to treat neurological diseases and conditions, such as Parkinson’s or Huntington’s diseases, Syed said. But he also said Vounatsos might surprise by venturing into new areas.
“He may not be the most obvious candidate [for CEO],” Syed said. “But he’s a nuts-and-bolts guy who’s going to focus on the numbers. He understands the realities of the situation — that the pressure on drug pricing is going to become tougher, and the multiple sclerosis franchise is going to be more competitive.”
While Vounatsos appears focused on a more aggressive acquisition strategy, some analysts believe Biogen could be targeted for takeover by an even larger company. They say it would be easier for an in-house chief executive to accept an attractive buyout offer than someone hired from outside.
“An internal promotion means nothing really changes and it’s status quo,” Michael Yee, biotech analyst for RBC Capital Markets in San Francisco, wrote in a note to investors. “Had they brought in someone new, then it would be under the premise that they take it on to build the company.”
If it remains independent, analysts said, Biogen must become more aggressive about getting more drugs in its pipeline. “They’ve been very conservative,” said Erich Schmidt, an analyst at the investment bank Cowen & Co. in New York. “We’ve been speculating about they’re going to do, and they’ve done nothing.”
Vounatsos told analysts that one of his goals will be turning around the company’s flagship multiple sclerosis drug franchise, partly by expanding into new global markets. Sales growth has been slowing.
At the same time, Vounatsos said, he was excited by the chance to launch Spinraza, which is being reviewed by the Food and Drug Administration. He also said he’s encouraged by the potential for aducanumab, Biogen’s lead drug candidate to treat Alzheimer’s disease. The company is currently enrolling patients for a late-stage clinical trial of that experimental drug.
Biogen’s board gave Vounatsos a base salary of $1.1 million for his first year on the job — with the potential to earn much more – according to a regulatory filing. He is eligible for a bonus worth at least 125 percent of his base pay. Vounatsos also was awarded stock valued at $10 million as a long-term incentive.
In comparison, Biogen paid it current chief executive, George A. Scangos, $16.9 million in total compensation last year, including a salary of $1.5 million, a performance-based bonus of $1.1 million, and stock awards valued at $13 million.
Scangos described his successor as “a strong results-oriented executive” who stood out during the board’s six-month search. He cited the successes of Vounatsos during a 20-year career at the drug giant Merck & Co., including his work in establishing a business in China that drove the company’s growth.
Vounatsos called Scangos his “mentor and adviser” at Biogen and said it was “truly an honor and privilege” to take over Massachusetts’ largest biotech company.
“I’m excited, I’m humbled, I’m ready to go,” he said.