Biogen Inc. Earnings: New Drug Sparks Life

Biogen (BIIB -0.78%) reported first-quarter earnings on Tuesday, resulting in investors excited about the potential for Spinraza, its new spinal muscular atrophy drug developed with Ionis Pharmaceuticals (IONS -0.90%), but tolerating ho-hum sales growth of its multiple sclerosis drugs.

Biogen results: The raw numbers

Data source: Biogen.

What happened with Biogen this quarter?

• The quarterly results look worse than they really are because this quarter doesn't include its hemophilia drugs that were spun out into Bioverativ (BIVV) in mid-January. Excluding those sales from both quarters, revenue was up a solid-albeit-not-outstanding 8%.
• The earnings line was also hit by a $1.22-per-share impact from the settlement with Forward Pharma over patents on Tecfidera.
• Sales of Tysabri had a nice boost, up 14% year over year, although some of that growth came from a one-time benefit as Biogen reached an agreement for the price of the drug with the Italian government, allowing the company to recognize sales from previous quarters.
• The rest of Biogen's multiple sclerosis drugs were basically flat to down a few percentage points, although top-selling Tecfidera, which was only up 1% year over year, was negatively affected by lower inventories held by middlemen before the final sale to patients, so growth in demand was actually higher.
• Sales of Spinraza came in at $47 million during the first full quarter of the drug on the market.

Image source: Getty Images.

What management had to say 

Biogen CEO Michel Vounatsos gave some interesting stats that show the potential to grow Spinraza sales substantially from here.

In the U.S., as of last week, there were 88 sites across 36 states that have administered Spinraza and 203 sites that have submitted start forms. These numbers have been increasing every week. Some leading centers are already dosing more than 10 patients, but most sites have only dosed 1 or 2 patients so far.

Doing the math, there's potential to more than triple the number of sites prescribing Spinraza, and many sites could increase the number of patients treated five- to tenfold.

Turning to the next potential drug, Michael Ehlers, Biogen's EVP and head of research and development, gave a little color on the company's strategy, saying:

I am extremely excited about how we're becoming more entrepreneurial. Our approach is to blend strong science with a medical mindset and an entrepreneurial emphasis on innovation. We will be agnostic to whether we find innovation internally or externally.

That last part is important for smaller companies like Ionis Pharmacueticals, which has a multidrug development partnership with the company.

Looking forward

Management plans to update its 2017 guidance after the second quarter is complete, but it's likely the earnings estimate will be adjusted downward given the $300 million Biogen recently agreed to pay Bristol-Myers Squibb (BMY -8.47%) to license its anti-tau Alzheimer's disease drug. The deal also requires Biogen to pay the remaining obligations -- $60 million in the near term -- to iPierian's shareholders, which developed the drug before Bristol-Myers Squibb bought the company. Biogen's management only had $100 million in its guidance budget for business development expense.

Nevertheless, those payments are investments in Biogen's future, which will hopefully more than pay for themselves in the future. In the nearer term, the next big thing from Biogen could be its Alzheimer's disease drug aducanumab, which is in phase 3 development. Management anticipates that the clinical trials will be fully enrolled by the middle of next year, resulting in potential readouts toward the end of 2019 or early 2020.