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What happened

Ahead of third-quarter earnings on Oct. 26, Biogen Inc.'s (NASDAQ:BIIB) shares declined 10.5% in October, according to S&P Global Market Intelligence.

So what

Investors steadily steered away from the large-cap biotech last month, and third-quarter results did little to encourage them to return.

Biogen delivered sales of $2.96 billion, up 6% year over year, and EPS of $5.19 in Q3. Sales were $50 million better than industry watchers were hoping for, and EPS came in $0.22 above analyst's forecasts.

Despite outperforming expectations, year-over-year top-line growth remained tepid compared to the company's historical rates, and a decision by management to shelve development of a next-generation multiple sclerosis (MS) therapy marked a second failure of a key pipeline candidate this year.

BIIB Revenue (Quarterly YoY Growth) Chart

BIIB Revenue (Quarterly YoY Growth) data by YCharts.

In June, the company reported disappointing mid-stage results for anti-lingo, a therapy it hoped could restore the damage to a nerve's myelin sheath that causes MS symptoms. Then in its conference call with investors in October, Biogen announced it's abandoning MT-1303, a S1P modulator that Biogen once hoped could insulate itself against fast-approaching competition from Celgene and Novartis, two companies developing their own S1P drugs. After reviewing MT-1303's market potential, Biogen is walking away from MT-1303 only a year after securing the rights to it from Mitsubishi Tanabe

Michael D. Ehlers, executive VP of research and development, said, "As we looked at how the landscape was evolving, both in terms of the regulatory competitive landscape, changing features there, and the corresponding fit with our strategic priorities about where we could best allocate resources based on our own expertise and competency -- we just determined that it wasn't as good of a fit as other things which we could allocate our resources toward."

Now what

Biogen is the dominant player in MS treatment, and that's not going to change overnight. However, new drugs are on the horizon that could eat away at Biogen's market share over the next few years, so investors are right to be concerned about Biogen's R&D stumbles.

Management isn't giving up on MS, but it is shifting a lot of R&D focus to other indications, including Alzheimer's disease. If that R&D pays off, then management could tap into a massive and underserved market. However, this research is still ongoing, and it could be a while before we learn how effective these "moonshots" are at curbing disease.

On the plus side, Biogen did recently deliver positive results for a spinal muscular atrophy (SMA) drug -- nusinersen -- that it's developing with Ionis. If approved, nusinersen could have nine-figure (or greater) potential, and that means it could help kick-start the company's growth. Nevertheless, Biogen's got some challenges ahead, and that suggests that growth investors might want to focus on other opportunities that have a better chance at double-digit top-line upside right now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.