Biogen Inc. reported 2017 revenues of $12.3 billion, a 7 percent increase compared to full-year 2016 revenues or an increase of 15 percent when revenues from hemophilia assets – ceded last year to spinout Bioverativ Inc. – were excluded. Cambridge, Mass.-based Biogen also reported full-year GAAP net income and diluted earnings per share (EPS) of $2.5 billion and $11.92, respectively.

The results generally satisfied analysts, who were even more assuaged by 2018 guidance, which projected revenues of $12.7 billion to $13 billion and GAAP and non-GAAP R&D expense of approximately 16 percent to 17 percent of revenue.

Biogen also expanded its neuroscience franchise by acquiring exclusive global rights to develop and commercialize KPT-350, an oral compound from Karyopharm Therapeutics Inc., and other undisclosed assets in exchange for $10 million up front and up to $207 million in milestones, plus tiered royalty payments on potential sales. A preclinical selective inhibitor of nuclear export, or SINE, compound, KPT-350 is designed to inhibit exportin 1 (XPO1) with the goal of reducing inflammation and neurotoxicity while increasing neuroprotective responses, aiming to treat amyotrophic lateral sclerosis (ALS) and other neurological and inflammatory conditions.

On Biogen’s earnings call, Michael Ehlers, executive vice president and head of R&D, said the company expected to move KPT-350 into a phase I study by year-end.

For Karyopharm, of Newton, Mass., the KPT-350 transaction provides some running room to advance lead asset selinexor (KPT-330), which has advanced into a phase II/III program in multiple myeloma and diffuse large B-cell lymphoma. (See BioWorld Today, March 3, 2017.)

“No value is currently in KPTI’s stock for KPT-350 or other agents beyond selinexor, representing, in our view, sources of ‘free upside,’” Leerink Partners LLC analyst Michael Schmidt wrote in an update on Karyopharm.

“We view this as an incremental positive for KPTI, monetizing an asset that had received virtually no attention or value from the Street, and continue to like KPTI shares into an eventful data year for lead drug selinexor,” agreed RBC Capital Markets analyst Brian Abrahams in a first glance at the deal.

H.C. Wainwright’s Edward White provided additional color on the structure of the transaction.

“Regarding the other assets, KPT-350 belongs to a patent family that includes other assets and the entire patent family is being transferred to Biogen,” he wrote in a first take. “However, Karyopharm believes these assets are of no value.”

Karyopharm’s focus “remains in executing the development of oral selinexor in oncology,” White added. “We believe this transaction bodes well for the company as Biogen, being a leader in the neuroscience franchise, is better suited for the advancement of the drug.”

On Thursday, Karyopharm’s shares (NASDAQ:KPTI) closed at $11.80 for a gain of $1.35, or 13 percent.

For Biogen, the Karyopharm asset, which penetrates the blood-brain barrier to a greater degree than other SINE compounds, supplements existing work in ALS with Ionis Pharmaceuticals Inc.

“This is a key component of nuclear export, and [Karyopharm] had done a lot of collaborative work, very nice scientific work, showing that this could reduce the hallmark pathology of sporadic ALS, which is the cytoplasmic accumulation of these toxic RNA-binding proteins, like TDP-43 and FUS, which undergo nuclear export that can be blocked in this way,” Ehlers explained on the earnings call. Biogen is pursuing the hypothesis that KPT-350 could potentially serve as an oral therapy for sporadic ALS, complementing the BIIB-067 program, which initially is targeting genetic forms of ALS such as superoxide dismutase (SOD1)-mutant ALS – the second most common form of the familial type of the disease.

“They’ve got very complementary modalities, completely orthogonal mechanisms and potentially distinct clinical populations,” Ehlers said.

‘One of the most successful rare disease launches in history’

For the year, Biogen reported that multiple sclerosis (MS) revenues grew 4 percent over 2016, to $9.1 billion, including $159 million in royalties from Roche Holding AG on estimated sales of Ocrevus (ocrelizumab), approved last year. For the fourth quarter, MS revenues grew 5 percent, to $2.3 billion, including $77 million in estimated Ocrevus royalties, compared to the same period in 2016.

Biogen said U.S. MS revenues in the fourth quarter benefited by approximately $40 million from increased inventory in the channel, compared to the third quarter, for flagship brands Tecfidera (dimethyl fumarate), Avonex (interferon beta-1a), Plegridy (peginterferon beta-1a) and Tysabri (natalizumab).

Full-year global Tecfidera revenues were $4.2 billion, an increase of 6 percent over 2016, while global Tysabri revenues were stable at $2 billion.

But the real up-and-comer was Spinraza (nusinersen), developed by long-time partner Ionis. Approved at the end of 2016 to treat spinal muscular atrophy, Spinraza contributed $884 million in global revenues, including $657 million in U.S. sales and $227 million outside the U.S. In the fourth quarter, Spinraza generated $218 million in U.S. sales and $144 million in ex-U.S. sales – mainly from Germany, Turkey and Japan. (See BioWorld Today, Dec. 28, 2016.)

As of year-end 2017, some 3,200 patients were on therapy across commercial and trial settings, according to Jeffrey Capello, Biogen’s new executive vice president and chief financial officer, who called Spinraza “one of the most successful rare disease launches in history.”

The sales threshold was achieved despite the fact that, in the fourth quarter and for the year, approximately 20 percent of U.S. Spinraza units were dispensed through Biogen’s free drug program, “highlighting our goal that no patient will forgo treatment because of financial limitation or an insurance denial in the U.S.,” Capello said.

In the U.S., more than 275 sites submitted start forms and 215 of these dosed at least one patient in 2017, Capello said on the earnings call. The number of patients on therapy in the U.S. increased by 33 percent in the fourth quarter compared to the end of the third quarter, although revenues from the fourth quarter grew at a lower rate than patients, which he attributed to loading dose dynamics.

“We’re seeing an increase in contribution for maintenance doses as patients who started earlier in the year transitioned to dosing once every four months on a chronic basis,” Capello explained. Roughly one-fourth of Spinraza’s U.S. revenues in the fourth quarter were attributed to maintenance doses, compared to 10 percent in the third quarter. “We expect this dynamic to normalize over time, with approximately 50 percent of revenue being driven by maintenance doses by the end of 2018,” he said.

In 2018, Biogen expects continued revenue growth from Spinraza in the U.S. but “a larger portion of the revenue growth to come from outside U.S.,” Capello said, both in existing territories and from expansion into additional countries.

Biogen reported cash, equivalents and marketable securities of approximately $6.7 billion and approximately $5.9 billion in notes payable and other financing arrangements as of Dec. 31, 2017.

In all, the Biogen story was sufficiently strong for Cowen and Co. analyst Eric Schmidt to raise the company’s price target to $408 from $338.

“Biogen reported impressive top-line results, although EPS missed on one-time fluctuations,” he wrote in a flash note. “The MS franchise continues to weather the Ocrevus launch well. Spinraza sales were strong as the drug’s ex-U.S. launch has accelerated, [and] 2018 guidance also exceeded expectations.”

Piper Jaffray’s Christopher Raymond noted that, “While some may rightly quibble that inventory build was a critical driver of the quarter, we think the broader theme remains that Ocrevus’ impact to BIIB’s MS franchise has stabilized and may not be as bad as once feared.”

Raymond was a bit wary of the fourth-quarter Spinraza story, however.

“An offset, and something to watch, is the sequentially down quarter in new Spinraza patient adds,” he wrote in an earnings note. “While management blamed holiday seasonality, the fact that the Spinraza sales force was doubled in Q4 makes us wonder if there is more urgency to find the all-important source of growth – new patients. For now, we maintain our FY18 Spinraza estimate of $1.7B (consensus $1.577B), but are mindful of this dynamic.”

And of M&A prospects, Jefferies Group LLC’s Michael Yee wrote that Biogen “emphasized the $37B+ of ‘capacity,’ which, in our view, makes clear their ability to do a ‘material’ deal if they are needed.” He cited Sage Therapeutics Inc. and Avexis Inc. as examples of companies with the synergy “to really move the needle beyond 2019+, or fix the ‘tail risk’ the Street sees with Spinraza.”

On Thursday, Biogen’s shares (NASDAQ:BIIB) gained $7.24 to close at $353.74.

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