Biogen to Acquire HI-Bio for $1.15 Billion Upfront in Major Autoimmune Disease Deal

On May 22, Biogen and immunotherapy company Human Immunology Biosciences (hereinafter referred to as “HI-Bio”) announced that they had reached an acquisition agreement. Under the terms of the agreement, Biogen will pay HI-Bio an upfront payment of $1.15 billion (approximately RMB 8.3 billion), as well as milestone payments totaling $650 million, bringing the potential total transaction value to $1.8 billion (approximately RMB 13 billion). The transaction is expected to be completed in the third quarter of 2024.

HIBio’s core asset, felzartamab, is a CD38-targeting monoclonal antibody primarily being developed for autoimmune indications. Clinical trials of felzartamab are currently in Phase II for primary membranous nephropathy, antibody-mediated rejection, and IgA nephropathy, and in Phase I for lupus nephritis.

HIBio was founded in 2021, incubated by prominent investment firms ARCH Venture Partners and Monograph Capital, with participation from Jeito Capital as well as unnamed institutional investors and family offices.

Its most recent funding round took place just a few months ago. In January this year, HI-Bio closed a $95 million Series B financing round, with investors including Alpha Wave Global, Viking Global Investors, Arkin Bio Capital, Jeito Capital, and ARCH Venture Partners. Previously, in November 2022, HI-Bio had completed a funding round amounting to $120 million.

HIBio is a biotech company focused on providing targeted therapies for patients with severe immune-mediated diseases (IMD). Autoimmune, allergic, and inflammatory diseases that lack targeted treatments can be collectively referred to as IMD, a condition that may affect up to 4% of the global population.

Typically, conventional therapies have broad mechanisms of action and fail to address the root causes of immune-mediated diseases (IMD). Consequently, many patients with IMD experience limited symptom relief and suffer from unnecessary side effects. More than half of patients remain unresponsive to existing treatments, highlighting a significant unmet clinical need. The global therapeutic market for IMD is projected to reach $150 billion by 2025.

HIBio’s primary asset, felzartamab, is a monoclonal antibody targeting CD38, a protein expressed on the surface of mature plasma cells; its dysfunction is believed to contribute to several immune-mediated diseases (IMDs).

Currently, felzartamab has received Breakthrough Therapy Designation (BTD) and Orphan Drug Designation (ODD) from the FDA for the treatment of primary membranous nephropathy (PMN), as well as ODD for the treatment of antibody-mediated rejection (AMR) in kidney transplant recipients. Phase II clinical trials for PMN and AMR have been completed, while the Phase II clinical trial for IgA nephropathy (IgAN) is still ongoing.

Felzartamab was originally developed by MorphoSys and acquired by HIBio through a transaction with MorphoSys in June 2022. According to the deal terms, MorphoSys will receive a 15% equity stake in HIBio, up to $1 billion in milestone payments, and net sales royalties in the double digits.HI-Bio will hold the exclusive global rights to felzartamab, excluding the Greater China region. The exclusive rights to develop and commercialize the product for all indications in the Greater China region have been held since November 2017, following the licensing agreement signed between I-Mab and MorphoSys.

In addition to its lead asset, felzartamab, HIBio’s primary pipeline also includes the anti-C5aR1 antibody HIB210, which is currently in Phase I clinical trials and holds potential for continued development across a range of complement-mediated diseases.HIB210, like felzartamab, also originated from the transaction with MorphoSys in June 2022.

Furthermore, HIBio also has a mast cell-targeting pipeline in the discovery stage, which also holds potential for application in various immune-mediated diseases.

Looking back, HIBio has been in operation for three years, with its core pipeline entirely based on in-licensed assets. Leveraging its keen eye for identifying “high-potential” candidates, the company has established a competitive advantage in the autoimmune disease sector through these in-licensed core assets, securing over $200 million in financing and achieving a current valuation of $1.8 billion. Having generated $1 billion in value just three years after its founding and only two years after initiating its in-licensing strategy, this venture has proven to be a highly cost-effective investment.

Biogen, another key player in this acquisition, is likely a familiar name to most. Founded in 1978, it is a leader in the field of neurological disorders and the top company in the multiple sclerosis (MS) sector.

Multiple sclerosis is an inflammatory demyelinating disease caused by autoimmune attacks on the myelin sheath—the fatty insulating layer surrounding nerves in the brain and spinal cord. This damage disrupts electrical impulses transmitted via nerves to other parts of the body and results in scarring (plaques or sclerosis). According to WHO data, more than 1.8 million people worldwide are living with multiple sclerosis. As its pathogenesis remains unclear, there is currently no drug that can cure MS. Most medications can only delay relapses, requiring patients to take medication for life.

As an early mover in the multiple sclerosis (MS) space, Biogen launched interferon beta-1a (brand name: Avonex) for the treatment of relapsing MS as early as 1996. It was the first drug proven to slow disability progression and reduce the frequency of disease exacerbations.

For many years, MS drugs have been Biogen’s primary source of revenue. It was not until 2017, when Roche (Genentech) launched Ocrevus (ocrelizumab), that a significant portion of the MS market share was captured, causing Biogen to lose its competitive edge in the MS field.According to PharmCube data, Ocrevus achieved sales of $6.539 billion in 2022, surpassing the combined sales of all multiple sclerosis (MS) drugs from Biogen.

In the same year, Biogen’s flagship product, Tecfidera, faced a patent challenge from generic drug giant Mylan (now part of Viatris). Biogen lost the lawsuit, and Mylan’s generic version of Tecfidera was successfully launched in August 2021, prompting a rush of other generic manufacturers to enter the market. As a result, Biogen further eroded its competitive advantage in the multiple sclerosis (MS) therapeutic area. Currently, the contribution of MS treatments to Biogen’s total revenue has declined from a peak of 82.51% to below 50%, while the company’s overall revenue has been shrinking sharply.

As the former leader in the multiple sclerosis (MS) field, Biogen urgently needs a new outlet to navigate its “midlife crisis.”

The autoimmune disease sector is indeed a promising choice. According to Frost & Sullivan’s projections, the global market size for autoimmune disease drugs is expected to reach $176 billion by 2030, with a compound annual growth rate (CAGR) of 3.6% from 2022 to 2030. Among this, China’s market size is projected to approach $25 billion by 2030, representing a tenfold increase compared to 2020, making it a significant source of incremental growth in the global autoimmune drug market.

In fact, Biogen is not the only company aggressively investing in this sector; in recent years, major pharmaceutical companies such as AbbVie, Johnson & Johnson, Roche, Sanofi, Novartis, and Vertex Pharmaceuticals have also prioritized their presence in this field. In April of this year, Vertex further expanded its footprint in kidney and immune system diseases by acquiring Alpine Immune Sciences at $65 per share, representing a premium of nearly 80%, for a total transaction value of approximately $4.9 billion (about RMB 35.454 billion).

Major pharmaceutical companies are concurrently focusing their efforts on the same therapeutic area, primarily due to stagnating financial performance. Patent expirations and the continuous emergence of novel products have caused growth in formerly core portfolios to decelerate, prompting each company to seek breakthroughs beyond its traditional areas of strength.

Meanwhile, in the domestic market, local companies are also making rapid strides. According to statistics from R&D Ke, among nearly 80 “active players” in new drug development listed on the A-share and H-share markets, 43 companies have entered the autoimmune disease sector. Particularly in therapeutic areas such as atopic dermatitis, psoriasis, rheumatoid arthritis, and systemic lupus erythematosus, some domestic pharmaceutical companies have achieved preliminary R&D success. In the field of psoriasis, several drug candidates have advanced to Phase III clinical trials or filed for marketing approval, with leading companies including Jiangsu Hengrui Medicine, Akeso, Quanxin Biotech, and 3SBio.

In the autoimmune field, this massive market worth hundreds of billions once gave rise to the blockbuster drug Humira. What other breakthroughs will emerge? Let time bear witness.

Reference: How Biogen Navigated Its “Midlife Crisis”?