Biogen will pay Ionis Pharmaceuticals $1 billion to expand their current partnership, doubling down on the RNA drugmaking technology that brought the spinal muscular atrophy drug nusinersen (Spinraza) to market.
Ionis (NASDAQ: IONS) gets $325 million in cash up front in the deal, while Biogen (NASDAQ: BIIB) will also buy 11,501,153 Ionis shares at $54.34 apiece, a roughly 25 percent premium to the company’s $45.85 closing price on Thursday. The cash kickstarts a new ten-year alliance to develop RNA drugs for a variety of neurological disorders with few treatment options available. Among them: dementia, neuromuscular diseases, movement disorders, ophthalmology, and inner ear diseases.
Biogen will pick the neurology targets, while Ionis will identify and produce the drugs themselves. Biogen will then pay for and run the animal and human tests on those therapies, and have the option to buy rights to them later on, with Ionis getting downstream payments and royalties.
“Though the total cash outlay for a discovery deal may raise some eyebrows, the fact that most of the cash is equity investment and [Biogen] notes only one commercial product would make the deal value positive should make it more palatable,” wrote RBC Capital Markets analyst Brian Abrahams, in a note on Friday.
Biogen and Ionis first cut a deal to co-develop nusinersen in 2012. The deal was a victory for Biogen: It bought worldwide rights to nusinersen in August 2016, and the FDA approved the drug months later. Nusinersen, the first-ever approved drug for the rare genetic disease SMA, generated $884 million worldwide in fiscal 2017 and is the company’s most lucrative drug outside of its core multiple sclerosis franchise.
Beyond SMA, Biogen has made it clear for some time that it wants to leverage its work with Ionis. R&D chief Michael Ehlers told Xconomy in 2017 that the company wanted to invest in more drugs like nusinersen—RNA-based treatments administered via infusions into the spine. Biogen believes it has a leg up on the industry developing drugs this way—as opposed to, say, antibody drugs or small molecules—because of the work it did with Ionis on nusinersen. In 2017, Ehlers told Xconomy that Biogen might be able to use the same method to treat several severe neurological diseases, like amyotrophic lateral sclerosis. “It just opens up the mind to all kinds of things that weren’t previously addressable,” he said at the time.
In a statement this morning, Ehlers says nusinersen’s success has bolstered Biogen’s belief that it can use RNA drugs to address many neurological diseases that other drugmaking methods can’t touch. These drugs can “directly intervene at the genetic origin of disease” and “have a higher probability of success than traditional modalities, with a potentially more efficient development path,” Ehlers said in the statement.
The pressure has been ratcheting up on Biogen to do a big deal for some time. Much of the company’s future fortunes currently rest with the ongoing Phase 3 trial of Alzheimer’s disease drug aducanumab. While aducanumab has shown promise in early tests, the list of Phase 3 Alzheimer’s failures is vast and has gotten even longer this year.
Biogen’s new leadership, headed by CEO Michel Vounatsos, has talked of ramping up business development activities. Since then, the company has made a series of small deals to add more drugs for Alzheimer’s, stroke, schizophrenia, ALS, and more. Biogen has yet to do a big buyout to help offset the risky, neuroscience-focused pipeline it has amassed over the years.
One of those targets just got away. Last week, Novartis agreed to pay $8.7 billion for AveXis (NASDAQ: AVXS), long seen as a perfect fit for Biogen. AveXis is developing a gene therapy for SMA that could hit the market next year and begin directly competing with nusinersen. Biogen already has some next-gen SMA drugs in the works, among them a gene therapy in early stages. “We think that Biogen missed an opportunity to capture a significant portion of the market by not acquiring AveXis,” Barclays analyst Geoff Meacham wrote recently.
Biogen and Ionis will each host conference calls to discuss the deal this morning. Ionis shares jumped 14 percent in pre-market trading.