Power Lunch: George Scangos, CEO of Biogen

After dominating the field of MS research, the Cambridge biotech firm's new strategy is to focus on Alzheimer’s. Will the risk pay off?

george scangos biogen ceo

Photographs by Ken Richardson

Even Biogen—at $60 billion, the most highly valued company in Massachusetts—hits a rough spot sometimes. Last year’s slow sales growth and disappointing drug trials led CEO George Scangos to cancel several programs and lay off 11 percent of the workforce. This month, Scangos, 67, will become chairman of PhRMA, the drug industry’s lobbying group—just as infamous former Turing Pharmaceuticals CEO Martin Shkreli and the presidential race have revived the debate about drug pricing. Scangos met Erick Trickey at Evoo, in the biotech hotbed of Kendall Square, for lunch to talk about Shkreli, Big Pharma, and Biogen’s new strategy.

Why the layoffs and the shift in research?

2015 was a tough year for Biogen. 2010 through 2014 were spectacular years: nothing but unbelievable good execution, good data, good results, and good luck. In 2015, our commercial products were still growing, but at a slower pace than we thought they were going to. We’re running expensive Phase 3 trials. So we decided not to try to compete in all of the areas where we were competing. We stopped immunology and fibrosis research. The result was substantial savings. Now we can fund programs that will drive value for the company and benefit for patients.

Some commentators call Biogen’s new focus on Alzheimer’s disease a risky strategy, because failure rates with Alzheimer’s drugs are high.

Those statements are backward-looking. They’re based on the fact that so many drugs for Alzheimer’s disease have failed in the past. So why did they fail? The medical field didn’t understand the biology of the disease very well. Our trials are not without risk, but I don’t think they’re as risky as most people think.

One Alzheimer’s drug is doing well for you in the clinical trials, but has the side effect of brain swelling. What’s your prognosis for it?

In a small trial, maybe 200 patients, Aducanumab seemed to show a reduction in the level of the plaques in the brains of Alzheimer’s patients. That seemed to result in a slowing of their cognitive decline. Most of the side effect is asymptomatic—patients don’t know they have it—and it resolves. Not all of it—some of it is more serious. It gets worse the higher the dose, but it seems to occur early on. The challenge is finding the right dose so that you have an acceptable level of side effects. We think we have such a dose.

You’re looking to reverse nerve damage in MS patients. What role will MS have in your company from now on?

Most of our commercial revenues come from MS. We don’t want all our eggs to be in the MS basket, so we want to diversify. What we understand from MS is neuro degeneration. We have a great team of neuroscientists and neurologists. That’s why we think that if we work on Alzheimer’s disease, Parkinson’s disease, ALS, and spinal muscular atrophy, which are all neurological diseases, we can diversify, but stay in areas where we have substantial expertise.

When Martin Shkreli raised a drug price from $13.50 a pill to $750, you said the price hike was a “perversion of the system.” How is the system supposed to work?

We spend money, we spend time, we take risk. Sometimes you succeed in getting a drug on the market. You have six to 12 years to make money back on that drug before you lose the intellectual property protection and it becomes generic. Then they should be cheap. [Turing’s drug] is a 50-year-old drug. It’s been generic for years. There’s an artificial monopoly on it. There’s only one supplier. He bought it, so he’s got a monopoly.

Biogen has raised the prices of some of its drugs. What’s the difference?

We’ve raised the prices of Avonex over the past few years. We powered [the revenue] back into research. And what did we get out of it? We got Tysabri, Tecfidera, and Plegridy—three now-approved drugs for MS. We were able to fund the R & D that results in [Anti-LINGO-1, an MS drug currently in Phase 2 study]. So without the ability to charge what we did for Avonex, some or all of those drugs would not have gotten to market. You raise prices so that the care a few years down the road can be better than it is today.

Hillary Clinton came out with a proposal about prescription-drug prices that includes taking away tax breaks for marketing. What’s your reaction?

What’s a marketing cost? You have to distribute the drug. You have to have medical people who talk to doctors and ask questions. You have to have people talk to patients about the drug. Are those marketing? If all that stuff’s included, it’s a terrible idea. If she means direct-to-consumer TV ads for drugs, I don’t think it’s a good idea, but it’s a less bad idea.