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Given the dampening U.S. market for multiple sclerosis drugs -- Biogen's (NASDAQ:BIIB) bread and butter -- the biotech's third-quarter earnings release on Wednesday was about as good as investors could have hoped for.

Biogen results: The raw numbers


Q3 2016 Actuals

Q3 2015 Actuals

Growth (YOY)


$2,956 million

$2,778 million


Income from operations

$1,425 million

$1,372 million


Earnings per share




Data source: Company press release. YOY = year over year.

What happened with Biogen this quarter?

  • Biogen's newest multiple sclerosis drug Tecfidera continues to be the growth driver, with a 10% year-over-year increase in sales.
  • Sales of Tysabri, which has been on the market for more than a decade, are still growing, with sales up 7% year over year.
  • The interferon class of drugs continues to decline, down 10% year over year. Sales of Biogen's newer longer-lasting Pregridy increased 28% year over year, but it wasn't enough to counteract the 15% decline in sales of older Avonex since the older drug is working from a much larger base.
  • Biogen and partner AbbVie (NYSE:ABBV) launched Zinbryta, another multiple sclerosis drug in August. Given the late-quarter launch, sales were minimal in the third quarter, but should pick up from here.
  • The biotech's hemophilia drugs -- Eloctate and Alprolix -- continue to displace the current treatments with year-over-year growth of 46% and 30%, respectively. Unfortunately, the combined sales of the drugs make up less than 10% of overall revenue, so the growth doesn't move the revenue needle. In August, Biogen announced plans to spin the drugs out into a separate company called Bioverativ. The company will begin trading in early 2017.
  • In August, Biogen and partner Ionis Pharmaceuticals (NASDAQ:IONS) announced that a clinical trial testing nusinersen in spinal muscular atrophy was stopped early because it was clear the drug was working. Biogen has already submitted the marketing application to the Food and Drug Administration. Given the unmet need, the application should be given a priority review.

What management had to say

Michael Ehlers, Biogen's EVP of research and development, thinks Biogen is in a no-lose situation with the upcoming release of phase 3 data for Eli Lilly's (NYSE:LLY) Alzheimer's disease drug, solanezumab, and how that might foretell whether Biogen's Alzheimer's disease drug, aducanumab, will work. "We think, if there were positive results out of the solanezumab trial, this would give great credence to the amyloid hypothesis of Alzheimer's disease, and I think bode well for the potential results of aducanumab," Ehlers said. But then he argued that "it will be much more difficult to make a conclusion about a negative result on solanezumab vis-a-vis the potential results of aducanumab" because of fundamental difference between aducanumab and Elli Lilly's drug. I guess that's "heads I win, tails you lose."

Biogen and Ionis Pharmaceuticals are running additional clinical trials testing nusinersen in different types of spinal muscular atrophy, and while only the trial in Type 1 trial has completed, Biogen and Ionis are hoping for a broad label based on the ongoing trial so the drug is approved for as many children as possible. "The extent of the label that we achieve -- that will be based on the agency's review of the totality of the data and the evidence. We will present evidence based on those populations in our effort to seek a broad label," Ehlers said.

CEO George Scangos is retiring, but he noted that the ongoing CEO search isn't interfering with Biogen's potential to do deals. "You should not assume this is on hold. We all believe this is an important part of what we have to accomplish. We are continuing with diligence on several companies as we speak."

Looking forward

Aducanumab clearly provides the biggest upside for Biogen, given the megablockbuster potential in Alzheimer's disease, but the phase 3 data won't be available until 2020, so investors need to focus on other drugs to diversify away from multiple sclerosis, such as nusinersen, especially if Biogen and Ionis can get a broad label.

There's also potential to grow Biogen's burgeoning biosimilars business. Sales of the copycat drugs only amounted to $31 million in the third quarter, but that was double the second quarter. It's currently only selling biosimilars in Europe, but as more biologics go off patent in the U.S., Biogen should be able to take advantage of the growth opportunity.

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