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Biogen CEO Expects To Make Biotech Generics As Market Develops

By Thomas Gryta Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Biogen Idec Inc. (BIIB) is likely to produce generic versions of biologic drugs as that niche industry develops and patents expire, marking a new foray for the biotech company, Chief Executive George Scangos said. In a wide-ranging interview, Scangos also highlighted plans to hire a new head of research and development; discussed his relationship with prominent shareholder Carl Icahn; and said the company expects to sell a pill for multiple sclerosis symptoms in Europe at about half the price that the same drug is sold in the U.S., as the continent puts more emphasis on effectiveness and value for reimbursement. "The management team has a job here to increase the value of the company by making it more efficient, adding to the revenue base, bringing new products forward, and to improve the perception of the company so that the rest of the world can better appreciate the value," he said. Scangos joined Biogen in July after the retirement of James Mullen, who was the target of activist investors because of lackluster performance and stock price. Scangos is a former scientist who spent the past 14 years running smaller biotech firm Exelixis Inc. (EXEL) after a decade working at drug giant Bayer AG (BAYRY). Last month, Biogen unveiled a sweeping restructuring plan that cuts costs and focuses the company around developing neurology treatments and its current franchise of multiple sclerosis drugs--although it isn't ruling out opportunities in "other serious diseases" and in biosimilars, Scangos said. Biosimilars, the closest thing to a generic for a biologic therapy, got a pathway to approval in the health-care law passed earlier this year, but the Food and Drug Administration has yet to provide formal guidance on their development. Biologics, as opposed to traditional chemical-based drugs, are large complex molecules made from living cells in specialized manufacturing facilities, making their production both tricky and costly. Biogen's plans are in the early stages, and some details--such as a sales strategy--are too early to speculate on, Scangos said. Biosimilars will likely be sold under their own brand name with no automatic substitution for prescriptions, meaning they need to be supported by a sales force. Biogen is interested in entering this developing industry primarily because the company has the research and production expertise in biologics, along with the manufacturing capacity to do so. "I see it as another sources of revenue," he said. That stance comes as some companies with similar capability have taken a stance against selling biosimilars, like Roche Holding AG (RHHBY ROG.VX), because they don't think they are innovative. Scangos said the biosimilars market will be complex and the company could have a "whole portfolio" of drugs, but it would likely need a partner to accomplish that. "I think it is something we will probably do in one form or another," Scangos said, but he stressed that selling branded drugs will continue to be the company's priority. "Innovation is our future ... we aren't going to shift our focus to become a biosimilars company." As part of the company's focus on research, Scangos plans to name a new head of research and development early next year. The position has been empty for a year and a half at the company. Scangos acknowledged that the research dollars were "spread too thin" in recent years, which contributed to Biogen's problems with developing new products. Biogen hasn't launched a new drug since 2004 and is highly dependent on multiple sclerosis treatments for the majority of its revenue, with Avonex and Tysabri bringing in almost 70% of its total of $4.4 billion last year. Scangos stressed the restructuring initiative was his own idea. He added that he didn't talk to Icahn in the process leading up to taking the Biogen job and hasn't talked to him since. Icahn and his associates have pushed for change at the company over the years, including an outright sale and streamlining its cost structure. So far, Wall Street has applauded Scangos' arrival. Biogen's stock is trading near its highest levels since mid-2008 and has risen more than 40% since the company announced Scangos was joining in the company. Possibly adding to the company's value would be European approval of fampridine, which helps improve walking in multiple sclerosis patients and is sold in the U.S. by Acorda Therapeutics Inc. (ACOR) under the name Ampyra. The drug is under regulatory review in Europe. If approved, Scangos said the company could price fampridine at about half the U.S. price, which is $12,850 per year, according to Biogen. Such a move would come as the government-run health systems are increasingly paying for drugs based on the value of a patient's benefit. In recent months, pricing in the region has come under greater pressure because of austerity measures related to the sovereign debt crisis. "It's not just getting the drug approved, but if you want it to be reimbursed and utilized then you have to have a price that people think is fair," he said. -By Thomas Gryta, Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com

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