Big biotech Biogen ( BIIB ) said Tuesday that it will spin off its hemophilia business into an independent company in a move much anticipated by Wall Street. Biogen, which focuses mainly on neurological diseases, got into hemophilia with the 2014 launch of its two long-acting infusion treatments, Eloctate and Alprolix, for hemophilia A and B, respectively. It carved out some market share from leader Baxter International ( BAX ), but in mid-April press reports relayed rumors that Biogen was thinking of selling or spinning off the business. Baxter had already made a similar move when it spun off its hemophilia-focused biopharma arm as Baxalta ( BXLT ) last July. Baxalta was quickly snapped up by Shire ( SHPG ) in a $32 billion deal. Both Baxalta’s and Biogen’s infusion therapies are under potential threat from new gene therapies that might be able to cure the disease with a one-time treatment, or at least manage it with far fewer treatments. BioMarin Pharmaceutical ‘s ( BMRN ) early-stage trial results for its hemophilia gene therapy , reported last month, supported the method’s potential. Biogen’s press release mentioned that investment in research was one rationale for the spinoff. “The new company, to be named at a later date, will focus on the discovery and development of therapies for the treatment of hemophilia,” said the release. “The new company plans to bring longer-acting therapies utilizing the XTEN technology into clinical development in the first half of 2017 and to accelerate the development of bispecific antibodies and hemophilia-related gene therapy programs.” It added that the spinoff will also enable the remaining portion of Biogen to focus on its core multiple-sclerosis business, which has been struggling lately as shown in Biogen’s Q1 earnings last month. Still, RBC Capital Markets analyst Michael Yee found the decision a bit puzzling. “Why would Biogen want to remove a growing and profitable, long-IP-duration biologics business that diversifies Biogen and ‘dilutes’ the EPS when it’s removed?” he asked in a research note. “In addition, Biogen is not selling the business and bringing in cash (approximate $4 billion to $6 billion valuation), and prior to today, the question was what would they do with that cash and who would they buy (they aren’t getting cash in this deal). So this seems odd and perhaps implies the valuation is not what the Street perceives if a buyer was not willing to pay up.” Biogen stock was up a fraction in early trading on the stock market today , near 275. The stock has found support above its 50-day line.
Rare-disease specialist BioMarin Pharmaceutical ( BMRN ) was trading up sharply Wednesday after it reported strong early-stage trial results for its gene therapy for hemophilia. BioMarin delivered a single dose of its candidate BMN 270 to eight patients with severe hemophilia A — the most common variety of the disease, which makes sufferers’ blood unable to clot. Six of those were on the highest dose, and all of those “improved from severe to either moderate, mild or normal range in terms of factor levels based on World Federation of Hemophilia criteria,” according to BioMarin’s press release. BioMarin is already preparing a large phase-three trial of BMN 270 in hopes of gaining FDA approval as quickly as possible. If successful, it could be a paradigm shift in hemophilia treatment. Currently, the only treatment is regular infusions of natural or recombinant blood-derived products to replace the missing clotting factors. A gene therapy, by attacking the disease’s origin in a defective X chromosome, could provide improvement for much longer, although since BioMarin’s trial only followed up after 16 weeks, it’s unclear just how long it is effective. Currently, hemophilia treatment is dominated by Baxalta ( BXLT ) — which is in the process of being acquired by Shire ( SHPG ) — and Biogen ( BIIB ). Both companies are working on their own gene therapies. Pfizer ( PFE ) holds the dominant position in the smaller hemophilia B market. RBC Capital Markets estimates that the hemophilia A market alone is about $4 billion a year. BioMarin stock was up 5% in early trading on the stock market today , near 90.50, and touched a three-month intraday high. Since last summer, the stock has been hit not only by the larger biotech sell-off, but also by the FDA’s rejection in January of its muscular dystrophy drug Kyndrisa, as well as mixed late-stage trial results last month on a treatment for another rare disease, called phenylketonuria. Currently its IBD Relative Strength Rating is a dismal 15, meaning the stock has performed among the lowest 15% of all stocks over the past 12 months. “While the data presented today were small numbers and of relatively limited follow-up … the data were encouraging (though looks like significant variability from patient to patient) and (1) suggest a path forward for BMN 270 in hemophilia A (and potentially for hemo A gene therapy in general) and (2) set a reasonably high bar for competition that will follow,” wrote Evercore ISI analyst Mark Schoenebaum in an email to clients. Image provided by Shutterstock .
The stock price of biotech CTI BioPharma ( CTIC ) fell to pennies Wednesday after the company said late Tuesday that it had withdrawn its FDA application for pacritinib, a blood-cancer drug that it was developing in partnership with Baxalta ( BXLT ). CTI and Baxalta had filed for approval of pacritinib for myelofibrosis on Jan. 5, but clinical trials of the drug were still underway. On Monday, CTI said that the FDA had placed a partial clinical hold after it had seen “excess mortality and other adverse events in pacritinib-treated patients compared to the control arm” in one of the trials, according to a press release. On Tuesday, CTI said the FDA had placed a full clinical hold on the trials, inducing the companies to withdraw the application and “decide next steps.” The application covered a fairly narrow range of patients — specifically those with intermediate and high-risk myelofibrosis with low platelet counts of less than 50,000 per microliter. However, it did present some potential competition to Incyte ‘s ( INCY ) Jakafi, both in its target and in its class, as both drugs are Janus kinase (JAK) inhibitors. “While we didn’t view CTI/Baxalta’s pacritinib as a significant threat to Incyte’s Jakafi franchise in myelofibrosis, we think the unfortunate and surprising setback of a potential competitor should remove a small overhang on Incyte shares,” wrote Leerink analyst Michael Schmidt in a research note. Incyte stock was up 3% in early afternoon trading on the stock market today , near 74. CTI BioPharma, already beaten down by Monday’s news, was off 40% to 30 cents. Baxalta was up about 2%, perhaps because its future acquirer, Shire ( SHPG ), received an unrelated upgrade from RBC Capital Markets. Analyst Douglas Miehm lifted his rating to outperform from sector perform, writing that the competitive threat to Baxalta’s hemophilia portfolio has been more than accounted for in Shire’s 42% drop in share price since last August. Shire stock also was up about 2%, near 154, early Wednesday afternoon. Image provided by Shutterstock .