Biogen plans to spend more than $1 billion to access experimental Parkinson’s disease drugs and take an equity stake in their developer, Denali Therapeutics.Once closed, the deal announced Thursday lets Biogen co-develop and co-commercialize drugs that are supposed to block a Parkinson’s-linked protein. Denali’s most advanced program, called DNL151, is included in the deal and set to enter late-stage clinical testing in 2021.Biogen will also have an exclusive option to license two more Denali programs that use the company’s technology to get drugs into the brain to combat neurodegenerative diseases. Biogen said one of those programs targets amyloid beta, the protein considered by many to be a root cause of Alzheimer’s disease. Additionally, Biogen has right of first negotiation for another two unnamed Denali programs.
That doesn’t mean Biogen can’t or won’t do flashier deals. On an earnings call in July, CEO Michel Vounatsos noted how the company has $5.3 billion in cash and marketable securities at its disposal, providing it the “financial flexibility” to evaluate M&A opportunities. Vounatsos also said that when it comes to dealmaking, Biogen’s “sweet spot” will be assets in the earlier stages of development.
The Denali deal mostly aligns with that strategy, as all the programs besides DNL151 are in preclinical stages. It also suggests, given the equity investment, that Biogen sees long-term value in Denali and its Transport Vehicle technology — which is meant to overcome the blood-brain barrier, one of the biggest challenges in neuroscience drug development.
Building a stronger tie with Denali now may be important too, as its work has attracted interest from other large drug companies such as Takeda and Sanofi.
Under the deal, Biogen will pay Denali $560 million on top of the $465 million equity investment. The equity will come from 13.3 million newly issued shares of common stock priced at roughly $35 per share, and give Biogen an 11.2% stake in Denali based on the biotech’s pro-forma outstanding stock.
Biogen’s recently and relatively big deals with Nightstar and now Denali have come as the Cambridge, Massachusetts-based company faces greater threats to its business. In multiple sclerosis, for example, the company lost a patent case in June that could leave its top-selling drug Tecfidera exposed to generic competition earlier than expected. In the second quarter, Tecfidera accounted for 32% of Biogen’s $3.6 billion revenue.
The company’s biggest growth product, Spinraza, is under pressure as well. Last year, Swiss pharma giant Novartis brought to market a gene therapy for the same rare muscle disease that Spinraza treats. Novartis has since reported an increasing number of patients taking its Zolgensma therapy, leading to $205 million in second quarter sales. And further competition may come soon, as Roche is close to receiving approval of an oral drug for the disease.
Biogen appears to be responding to these challenges by expanding and diversifying its pipeline of experimental drugs. Parkinson’s has been one particular focus, evidenced in both the Denali deal and an earlier one with Sangamo Therapeutics.
Biogen’s most closely watched asset, though, continues to be its experimental, amyloid-beta targeting drug aducanumab.
The company maintains that aducanumab could become the first drug approved for what many believe to be the underlying cause of Alzheimer’s. But the data meant to support it are mixed and confusing, leading some investors to see a low chance of approval.
Denali investors reacted positively to Biogen’s interest, sending shares up about 40% Thursday morning.