Change at the top for Biogen after Alzheimer’s drug flops

Biogen will replace its CEO and drop marketing of its controversial Alzheimer’s drug EduHelm less than a year after the drug’s launch, following backlash from experts, doctors and insurance companies.

The company announced on Tuesday that CEO Michel Vonatsos will continue to lead Biogen until a successor is found. Vounatsos joined the company in 2016 and was the chief architect of Biogen’s strategy built around Aduhelm.

For now, Biogen said it is “substantially eliminating” Aduhelm as part of a $1 billion dollar cost-savings plan designed to refocus the company’s flagging biotech business.

The announcement represents a clear acknowledgment that the Cambridge, Massachusetts-based company has failed to find a market for a drug that was expected to drive its business for years to come.

EduHelm was the first new Alzheimer’s drug in nearly two decades. Initially priced at $56,000 a year, analysts predicted it would quickly become a blockbuster drug that would generate billions for Biogen.

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But doctors are hesitant to prescribe it, given weak evidence that the drug slows the progression of Alzheimer’s. Insurers block or restrict coverage over the drug’s high price tag and uncertain benefits. Even the company’s decision to cut the price of the drug in half—to $28,000 a year—had little to do with swift improvement.

The biggest blow came last month when the federal government’s Medicare health plan placed strict limits on who could get the drug, wiping out much of its potential US market. The majority of US Alzheimer’s patients are old enough to qualify for Medicare, which includes more than 60 million people 65 and older.

The drug had sales of just $2.8 million in the first quarter ended March 31.

Biogen said Tuesday that it forfeited about $275 million from the EduHelm inventory write-off in the quarter, and that it will essentially wind down its sales and marketing infrastructure that supports the drug.

Aduhelm’s expenses dragged down the company’s quarterly results and Biogen fell short of Wall Street estimates, reporting adjusted net income of $535 million, or $3.62 per share. Analysts are forecasting earnings of $4.34 per share, according to FactSet.

Biogen officials said the restrictive Medicare decision essentially denied EduHelm to most eligible US patients. Last month the company announced it was pulling its marketing application for the drug in Europe.

Biogen will continue to run a federally mandated confirmatory trial designed to establish whether the drug actually slows Alzheimer’s.

The drugmaker’s quarterly revenue fell 6% to $2.5 billion, under pressure from lower sales of multiple sclerosis drugs in the US due to cheaper, generic competition. The company also reported lower sales of its specialty drug Spinraza, which is used to treat a rare spinal disorder in children.

For the year, Biogen confirmed earnings guidance of between $14.25 and $16.00 per share.

Biogen officials said they would continue to develop new Alzheimer’s treatments, including a drug like EduHelm. Researchers await final-stage trial results for the drug in the fall. But the company also highlighted other drugs in its pipeline, including potential treatments for depression and schizophrenia.

“Given the many setbacks the company has faced, Vounatos’ departure was expected,” RBC Capital Markets analyst Brian Abraham wrote on Tuesday. The move and restructuring “will be well received over the long term, and give the company a fresh start in refocusing its R&D priorities.”

Shares of Biogen Inc. gained about 1%.

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