Biogen Inc. - Company Profile, Information, Business Description, History, Background Information on Biogen Inc.

14 Cambridge Center
Cambridge, Massachusetts 02142

Company Perspectives:

The extraordinary advances in modern biology that began when James Watson and Francis Crick broke the DNA code in 1953 have led to scientific breakthroughs and the creation of the new, biology-based biotechnology industry. The comprehensive mapping of the human genome is causing another major discontinuity in the rate of change in life-science research. These discontinuities provide the greatest opportunity for advancement in medical and life sciences in history and for significant organizations to be built in the pharmaceutical industry. Biogen is a corporate and scientific leader in this rapidly changing environment.

History of Biogen Inc.

Biogen Inc. develops, manufactures, and markets drugs for human healthcare through genetic engineering. Its top product is Avonex, which is used in the treatment of multiple sclerosis. A pioneer and key player in the dynamic and volatile biotechnology industry, Biogen has distinguished itself as one of the few biotech companies to remain independent and to achieve profitability. With annual research and development expenditures of $300 million as it entered the 21st century, Biogen had a number of drugs in its development pipeline.

Birth of a Biotech Pioneer

Biogen is considered one of the pioneers of the biotechnology industry. It got its start in 1978 when Walter H. Gilbert, a Nobel prize-winning biologist who was teaching at Harvard at the time, decided to try developing his research into marketable products. Biotechnology, as it was known in the mid-1970s, was still in its infancy. The discovery of the structure of DNA, which led to the understanding of the process by which proteins are produced by cells, had occurred in 1953. But it was not until the early 1970s that more rapid progress ensued. Significantly, in 1973 two U.S. scientists discovered the process of recombinant DNA, whereby a piece of DNA is snipped from one gene and spliced into another gene. The significance of that discovery was that it proved that scientists could genetically alter microorganisms and, particularly important, produce mass amounts of proteins that naturally occurred only in small quantities.

Walter Gilbert had been a major contributor to the development of recombinant DNA technology during the 1970s, and he had earned his Nobel prize as a result of his research in that area. Subsequent related breakthroughs during the middle and late 1970s indicated that scientists would eventually be able to use gene-splicing and cloning techniques to create various 'wonder' drugs and products that could, among other benefits, cure cancer and many other diseases or create perfect produce and livestock with fantastic characteristics. Despite the promise of the technology, a recognizable industry that could develop such drugs and take them to market was slow to form. Before 1980, in fact, only a few significant biotech start-ups had appeared: Cetus (founded in 1971); Genentech (1976); Genex (1977); Biogen (1978); Centocor (1979); and Amgen (1980).

Biogen, like its biotech peers, was able to capitalize on the belief of some investors during the late 1970s that biotechnology was going to radically impact many areas of industry, medicine, food, energy, and agriculture. Although Biogen and some other companies made significant contributions to the burgeoning field of biotech, it was not until the 1980s that the industry boomed. The growth was in large part the result of a U.S. Supreme Court ruling that genetically engineered bacterium could be patented. For many, that ruling suggested the possibility of unimaginable wealth for biotech innovators. As a result, millions of dollars poured into the industry, primarily through venture capital but also through the sale of publicly traded stock. Companies that showed promise, such as Biogen, benefited the most.

Biogen launched a number of research initiatives during the late 1970s and early 1980s related to a variety of healthcare drugs. Some efforts fizzled, but, unlike many other biotech start-ups, Biogen eventually succeeded in generating some marketable products. The two biggest winners were a hepatitis B vaccine and alpha interferon. The hepatitis B vaccine was, as its name implies, a vaccine for hepatitis B, a blood-borne disease that causes a serious infection of the liver and substantially increases the risk of liver cancer; more than 250 million people worldwide still suffered from chronic hepatitis B virus infections in the early 1990s. Biogen eventually obtained patents in several countries related to its hepatitis B antigens produced by genetic engineering techniques, and the drug--marketed by SmithKline Beecham plc and Merck & Co., Inc.--became a big seller. In many countries, in fact, infants were commonly vaccinated against hepatitis B using Biogen's drug.

Alpha interferon was an even bigger source of revenue for Biogen. Alpha interferon is a naturally occurring protein produced by normal white blood cells. Biogen developed and patented a process of producing vast amounts of the protein using recombinant DNA techniques. Its alpha interferon compound became the first genetically engineered drug to receive market approval in the United States. Biogen's alpha interferon, also known as Intron A, was eventually being sold by licensee Schering-Plough Corporation in more than 60 countries to treat a variety of conditions including hepatitis B, hepatitis C, genital warts, Kaposi's sarcoma (an AIDS-related cancer), and hairy-cell leukemia.

1980s: Near Bankruptcy, Then Recovery

Biogen racked up major points in the research and development game during the early 1980s, and positive press brought tens of millions of dollars into its coffers. Like most biotechnology companies, though, Biogen was burning through the cash as fast, or faster, than it poured in (the company went public in 1983). CEO Gilbert, in his quest for new genetically engineered drugs, established a global research and development network during the early 1980s that sported operations in Zurich, Geneva, Belgium, Germany, and the United States. Although impressive and sometimes effective, the organization eventually became unwieldy and lacked focus. Some critics charged that despite his scientific prowess, Gilbert lacked business skills. The company was a great place to do research, but it had yet to show a profit. By 1984, in fact, Biogen had racked up a stunning $100 million in losses and was teetering on the edge of bankruptcy.

Gilbert managed to keep Biogen afloat during the early 1980s by licensing other companies to manufacture, market, and distribute its drugs. To make ends meet, he also started selling Biogen's patents. Some criticized the move as representing a sellout of the company's technological achievements; Biogen's original goal, in fact, had been both to develop and manufacture its inventions. Instead, the company had essentially become a research boutique that supplied drug companies in Europe, Japan, and the United States with technology. In the end, however, Gilbert's licensing and selling was credited with saving the company from total bankruptcy. Indeed, many of Biogen's scientifically savvy biotech start-up peers were effectively forced out of business--often through merger or acquisition--because of financial difficulties.

By 1985 Biogen was using an estimated $100,000 each day in research costs. Furthermore, royalty revenues had slid to less than $20 million annually because the company had sold some of its patents. Biogen investors were fed up; the company's directors had already, in fact, pulled Gilbert from the chief executive slot and had been searching for a replacement for more than a year. Finally, in 1985, they hired James L. Vincent. Vincent graduated from Duke University, where he had been recruited to play football but did not because of a neck injury. He earned his M.B.A. at Wharton before joining Bell Telephone Company of Pennsylvania. From there he served in various positions including president of Texas Instruments-Asia, chief operating officer at Abbott Laboratories, and president of Allied Health and Scientific Products Company. He was known as a hard-charging, imposing, and capable manager.

Biogen began a radical restructuring and turnaround under Vincent's command. Soon after arriving at Biogen, Vincent sold or closed the European operations and brought in some new managers. Significantly, he also began working to recover some of the patents that the company had sold off during the early 1980s. By the time Vincent arrived, in fact, Biogen had sold off nearly 90 percent of its patents. Vincent succeeded in negotiating with companies to get or buy back most of those patents. By 1989 Biogen had regained control of 90 percent of all of its original patents. As Vincent got back the rights to the company's technology, he started licensing them to other manufacturers. The result was that the company's royalty revenues increased and Biogen's balance sheet gradually began to move back toward solvency.

The impact of Vincent's efforts was slow to materialize. Biogen lost more than $70 million between 1985 and 1988, and gross revenues actually plummeted to a low of about $8.5 million in 1987 after net income dipped to a $28 million deficit in 1986. But Biogen started to spring back in the late 1980s. Sales reached $28.5 million in 1989, and the company posted its first-ever profit--a $3.2 million surplus. Revenues surpassed $50 million in 1990 and then hit $61 million in 1991, by which time the company was generating net income of more than $7 million annually. That growth was in part attributable to new additions to Biogen's product line. By 1991 the company was selling through licensees several different drugs that were generating global sales of about $600 million annually: Intron A Alpha Interferon, Hepatitis B vaccine, Hepatitis B diagnostics, and Gamma Interferon (used to treat renal cell carcinoma).

1990s and Beyond: Moving from Licensor to Manufacturer and Marketer

Biogen benefited in 1992 from heady gains in sales of several of its drugs, particularly alpha interferon. The company stunned analysts, in fact, by reporting revenues of $123.8 million for the year and an increase of more than 500 percent in its net income to $38.3 million. The company expected those gains to continue in the near future. Furthermore, Biogen had several new products in its research and development pipeline that had the potential to add big sums to its bottom line. The most promising of its drugs going into the mid-1990s was Hirulog, a blood thinner derived from leeches. Hirulog, which acted as a direct inhibitor of Thrombin (the main enzyme that coagulates blood), was designed to provide immediate relief to people with severe and sudden chest pains, and to prevent clotting complications after veins were opened up through balloon angioplasty or coronary bypass surgery. Biogen had invested heavily in Hirulog and was trying to gain Food and Drug Administration (FDA) approval to market it.

The Hirulog project represented Biogen's drive to become a manufacturer and marketer, rather than just a developer and licensor, of drugs. Simultaneously, Biogen was seeking approval for a drug that it had developed and wanted to manufacture called interferon beta-1a (the trade name of which was Avonex), designed as a treatment for relapsing multiple sclerosis. Both drugs were in the final stages of clinical testing in mid-1994. If approved, they would usher Biogen into a new era as a full-fledged pharmaceutical company that developed and sold its own drugs and products. Moreover, Vincent had been beefing up Biogen's management and sales force to prepare for their approval. To that end, in January 1994 he had conducted a major coup by recruiting James R. Tobin to Biogen's management ranks to serve in the newly created position of president and chief operating officer.

The 49-year-old Tobin had previously spent 21 years at pharmaceutical giant Baxter International Inc., where he rose from a financial analyst to president of the company. Tobin received his master's degree from Harvard Business School before joining Baxter. He was apparently being groomed to assume the chief executive position at Baxter when he decided that he was looking for a different kind of challenge. Tobin was considered a heavy hitter in the pharmaceutical industry, and his move to Biogen gave that company a new respect in the industry. Tobin's job at Biogen would be to shepherd the company from a licensor to a manufacturer and marketer of drugs. Shortly before he arrived, Biogen posted record revenues of $136.5 million for the year and net income of about $32.5 million.

Biogen entered 1994 with high hopes. Its dreams were temporarily stalled, however, by a string of setbacks. In the fall of 1994, Biogen announced that it was discontinuing its efforts to bring Hirulog to market because of disappointing test results. That news was greeted by shareholder lawsuits alleging securities violations for stopping work on the drug. Then, early in January 1995, news came that German pharmaceutical giant Schering AG (since World War II, not affiliated with Schering-Plough) announced plans to produce interferon beta-1a, Biogen's other breakthrough drug, using the same method as Biogen. Biogen, however, maintained that it had access to all patents necessary to market Avonex interferon beta-1a. Nevertheless, the news sent Biogen's stock price tumbling $7 to $35.37, which was down from a high of $55.75 before the Hirulog setback.

In large part because of writeoffs related to Hirulog, Biogen posted a net loss of $4.9 million from revenues of $156.34 million. The company's problems were exacerbated early in 1995 when pricing changes in Japan of the alpha interferon that Biogen developed and licensed to Schering-Plough Corp. contributed to a significant reduction in first-quarter profits. However, that news only marginally affected the company's stock price, as Biogen's balance sheet easily withstood the hit. Indeed, Biogen's gains during the early 1990s had put it in excellent financial shape. The company entered the mid-1990s cash-rich and among the healthiest biotechnology companies in the country. It was still generating revenues from licensing its marketable drugs, and some of those products were positioned well to benefit from market changes. It also had a number of promising products in development, although they had not yet progressed past the clinical, or final, stage of premarket testing.

In May 1996, in a key event in the company's history, Biogen announced that the FDA had unanimously approved Biogen's Avonex interferon beta-1a drug for treating relapsing forms of multiple sclerosis. Studies had found that Avonex was, in the words of Biogen CEO Vincent, 'the first and only drug to show in a blinded clinical trial that it slows the progression of [MS] disability as well as reduces the frequency of exacerbations.' Thanks to 18 months of planning following the preliminary FDA approval, Biogen began marketing Avonex in the United States within 35 hours of final FDA approval. A successful launch was jeopardized, however, by a lawsuit filed by Schering AG, which had begun selling its beta interferon drug in the United States in 1995 under the name Betaseron. When approving it in 1993, the FDA had given Schering rights to exclusivity vis-à-vis Betaseron under the federal Orphan Drug Act (so-called 'orphan drug status'); in an unprecedented move three years later, however, the agency gave parallel orphan drug status to Avonex because of the latter's method of injection, which reduced skin side effects. Schering sued the FDA, but in October 1996 a federal judge dismissed the suit, agreeing with the FDA that Avonex was 'clinically superior' to Betaseron and, therefore, deserving of parallel protection, as stipulated in the Orphan Drug Act. By late 1996 Avonex was outselling Betaseron in the United States, with more than 60 percent of new prescriptions being written for the Biogen treatment.

The launch of Avonex helped increase sales at Biogen from $134.7 million in 1995 to $259.7 million in 1996, an increase of nearly 93 percent. Net income was a record $40.5 million. In early 1997 Tobin was promoted to president and CEO, with Vincent remaining chairman. That year, the company began marketing Avonex in the European Union, despite its loss in a patent battle with Schering in Europe. Litigation between Biogen and Schering over their beta interferon products continued into the early 21st century, clouding Biogen's future. Also hanging over Biogen was a lack of new products in the pipeline for introduction by 1998 and 1999 as well as the potential for falling income from royalties starting in 2000. Partly in response, Biogen entered into an agreement with Merck to develop small molecule inhibitors for the treatment of asthma and other diseases. As part of the deal, Merck agreed to pay Biogen as much as $145 million over several years, representing a significant cash infusion.

Biogen was a 1998 recipient of the National Medal of Technology, so honored for developing pharmaceuticals 'designed to treat large, previously underserved patient populations throughout the world'--and particularly for its development of hepatitis B vaccines, which were the first vaccines using recombinant DNA technology. Soon after the announcement of this prestigious award, however, the company was rocked by the sudden departure of Tobin. The president and CEO had clashed with Vincent and had demanded a freer hand from the company board. The board refused, leading to Tobin's resignation. Vincent was named interim CEO, and James C. Mullen, a ten-year company veteran who had been in charge of European operations, was promoted to president and COO in February 1999. Meantime, Biogen recorded record net income of $138.7 million on record revenues of $557.6 million. Sales of Avonex were $394 million, or more than 70 percent of the total.

With Avonex's orphan drug status set to expire in 2003, Biogen needed to bring additional products to market. The company suffered a setback in late 1999 when it halted trials of Antova, an immune system regulator, after some patients participating in the trials developed blood clots. Proceeding more smoothly through the approval process, however, was Amevive, a drug to treat the skin disease psoriasis. Biogen hoped to get FDA approval by early 2002. Also in the pipeline was a congestive heart failure treatment called Adentri. The company was investigating other potential uses of its blockbuster Avonex drug, the sales of which reached $621 million in 1999 in part because of geographic market expansion. In early 2000 Biogen announced that Avonex had proven effective in delaying the development of multiple sclerosis in people showing early signs of the disease. The company immediately moved to gain approval from the FDA and other regulatory agencies worldwide to expand the drug's prescription labeling to include these potential new patients. In June 2000 Mullen was promoted to president and CEO, with Vincent continuing as chairman. Mullen, therefore, assumed the important responsibility for shepherding the follow-up to Avonex through the pipeline.

Principal Subsidiaries: Biogen Canada, Inc.; Bio Holding I, Inc.; Bio Holding II, Inc.; Biogen Realty Corporation; Biogen Realty Limited Partnership; Biogen Technologies, Inc.; Biogen Belgium S.A./NV; Biogen B.V. (Netherlands); Biogen France S.A.; Biogen GmbH (Austria); Biogen GmbH (Germany); Biogen International B.V. (Netherlands); Biogen Limited (U.K.); Biotech Manufacturing CV (Netherlands); Biotech Manufacturing Limited (Channel Islands); Biogen Norway AS; Biogen Sweden AB; Biogen (Denmark) A/S; Biogen Finland Oy; Biogen Foreign Sales Company, Ltd. (Barbados).

Principal Competitors: Amgen Inc.; Serono S.A.; Cephalon, Inc.; Genentech, Inc.; Glaxo Wellcome plc; Interferon Sciences, Inc.; Merck & Co., Inc.; Novartis AG; Schering AG; Teva Pharmaceuticals Industries Limited; Vertex Pharmaceuticals Incorporated.


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Further Reference

Ackerman, Jerry, 'Biogen Veteran Mullen Is Named President,' Boston Globe, January 7, 1999, p. C5.Bovet, David, and Joseph Martha, 'Biogen Unchained,' Harvard Business Review, May/June 2000, p. 28.Brandel, William, 'Businessperson of the Year: How Biogen's Jim Vincent Got Biotech to Turn a Profit,' New England Business, January 1991, p. 16.Carton, Barbara, 'Biogen Scores Win As Judge Dismisses Avonex Challenge,' Wall Street Journal, October 9, 1996, p. B4.'CEO Interview: Biogen, Inc.,' Wall Street Transcript, November 1, 1999.Gendron, Marie, 'Biogen Pushes Ahead to Develop New Multiple-Sclerosis Treatment,' Boston Herald, January 25, 1994.Hower, Wendy, 'Antsy Investors Eye Biogen's Drug Trials,' Boston Business Journal, July 20, 1992, p. 6.Johannes, Laura, 'Biogen Chief Executive Resigns,' Wall Street Journal, December 24, 1998, p. B2.------, 'Biogen Searches for Another Blockbuster Medication,' Wall Street Journal, August 13, 1999, p. B4.Moore, Stephen D., 'Drug Makers Battle Over MS Treatment,' Wall Street Journal, November 9, 1998, p. B13A.Pollack, Andrew, 'An Air of Mystery Surrounds the Abrupt Resignation of Biogen Chief,' New York Times, December 24, 1998, p. C1.Prince, Cathryn J., 'Patent Deal Rocks Biogen,' Boston Business Journal, January 13, 1995, p. 1.------, 'Tobin: The Direct Approach,' Boston Business Journal, January 13, 1995, p. 20.Rosenberg, Ronald, 'Biogen Bets on the Leach: Biotech Company Seeks Approval of Drug Expected to Capture a Chunk of $500 Million Market for Blood Thinners,' Boston Globe, November 17, 1992, p. 39.------, 'Biogen Cuts $145m Deal with Merck Firm to Get Cash to Develop and Market Asthma Drug,' Boston Globe, December 4, 1997, p. C1.------, 'Deal Tempers Fears Over Gap in Drug Development,' Boston Globe, December 7, 1997, p. F1.------, 'Royalty Drop Slashes Biogen Profits,' Boston Globe, April 28, 1995, p. 69.------, 'Tobin Hired by Biogen a `Coup,' Boston Globe, January 20, 1994, p. 33.Shao, Maria, 'Growth--The Globe 100; Biogen Inc.,' Boston Globe, May 17, 1994, p. 56.Syre, Steven, 'Biogen Faces Patent Hurdles,' Boston Herald, January 21, 1995, p. 17.

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