Biogen Earnings Beat Expectations. All Eyes Are on the Alzheimer’s Drug.

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Biogen stock has outperformed the broader healthcare sector so far this year.


Adam Glanzman/Bloomberg

Biogen is cutting costs, and leaving the door open to mergers and acquisitions as its new CEO prepares for a series of Food and Drug Administration decisions that will do much to determine the company’s fate.

In an earnings presentation on Tuesday, Biogen (ticker: BIIB) CEO Chris Viehbacher said the company has big opportunities ahead, in the FDA’s pending decisions this summer on full approval of its Alzheimer’s disease drug Leqembi, and its depression drug zuranalone.

“I can’t think of another major biopharmaceutical company that has that many new significant products to launch,” he said.

Both launches present challenges, however. And in the meantime, Biogen’s base business, which focuses on multiple sclerosis treatments, is fading.

Viehbacher announced a new cost-saving effort on Tuesday, though he offered few details, saying the company would say more at its next earnings report.

“There’s a balancing act as we try to shift our resources behind the growth opportunities, while still supporting our historic MS business,” Viehbacher said. “It’s a redesign effort.”

Biogen reported first-quarter earnings that slightly beat Wall Street expectations, though investors were more focused on the Leqembi launch. The company reported quarterly revenue of $2.5 billion, slightly better than the consensus estimate of $2.3 billion among analysts tracked by FactSet. Non-GAAP earnings were $3.40 per share in the quarter, better than the consensus estimate of $3.28.

While overall revenue beat consensus estimates, much of that outperformance came from the company’s contract-manufacturing business. Product revenue generally came in below expectations, highlighting the threat to the company’s base businesses. Biogen also announced that it was dropping a number of drug-development initiatives.

The stock was down 3.6% in Tuesday trading despite favorable news just after midday. The FDA announced the accelerated approval of Biogen’s amyotryphic lateral sclerosis treatment for ALS patients with a particular genetic mutation known as SOD1. An FDA advisory panel voted in March that evidence showed that the drug, tofersen, did reduce a biomarker thought to predict clinical benefit in patients, though it also found that Biogen still hadn’t proven the treatment’s clinical benefit.

A confirmatory Phase 3 trial is continuing.

“It is not a big product, obviously, about 300 patients,” Viehbacher said of tofersen on the Tuesday call. “But it’s classic Biogen.”

Tofersen will be marketed under the name Qalsody. In a statement distributed after the approval, Viehbacher said that the approval represented important progress in ALS research, as it established an accepted biomarker to predict clinical benefit in certain forms of ALS.

On the investor call early Tuesday, Viehbacher said that the company was “looking at external growth,” a nod to the possibility of deal making, and announced the appointment of a new head of corporate development. The company’s chief financial officer, Michael McDonnell, said on the investor call said that Biogen has the capacity to spend around $10 billion on M&A.

Viehbacher said that the company was interested in deals that could bring near-term revenue. “In terms of more transactions, I think we would be more inclined to find something that is revenue generating in the near term,” he said. “In the next couple of years, that’s where we’re in this, you know, the tide going out on MS and the tide coming in on new products….External growth could also help us to manage that transition period.”

Biogen stock is outperforming the broader healthcare sector so far this year, up 5.8% as of the close of trading on Monday, while the
Health Care Select Sector SPDR Fund
(XLV) is marginally lower. The
S&P 500
is up 7.8%.

Biogen investors are waiting on news from
Eli Lilly
(LLY), expected soon, on the performance of Lilly’s Alzheimer’s drug donanemab in a Phase 3 trial. A disappointing showing by donanemab would increase expectations for Leqembi’s market share.

“In some ways, it would be good if their data are positive,” Viehbacher said of the donanemab data, because a positive result would confirm that the mechanism behind the two drugs actually works.

“We’ve always seen that in new markets, if there’s more players, that those markets develop faster,” Viehbacher said. “I think it’ll be good if there’s other players in the market. But I don’t think we are too concerned about competing with donanemab.”

Also on the calendar is a July meeting of a key Food and Drug Administration advisory committee to discuss potential full approval of Leqembi, an important step in securing Medicare coverage for the drug.

As for zuranalone, investors are waiting for the FDA to decide on the companies’ application for approval of the drug as a treatment for major depressive disorder and postpartum depression. The agency is scheduled to make a decision by Aug. 5.

Write to Josh Nathan-Kazis at [email protected]

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