Biotech giant Biogen (BIIB 1.76%) has generated many headlines in the past couple of years, largely due to its Alzheimer's disease (AD) therapy, Aduhelm, and that drug's controversial path to approval in the U.S. However, this landmark regulatory win hasn't been enough to save Biogen's performance.
The company's shares have significantly lagged the market in the past year. Unfortunately, it could get worse before it gets better for the biotech. Let's look at two red flags that Biogen is currently facing and discuss whether it is worth it to purchase the company's shares right now.
1. Declining revenue
Drugmakers typically benefit from patents that allow them to sell their products on the market without worrying about cheaper generic competition, at least for a set period. But when these patents expire and generics are introduced, that almost always leads to declining sales for medicines. That's what's been happening to Biogen over the past year or more.
The company's multiple sclerosis medicine, Tecfidera, has been facing generic competition in the U.S. since late 2020, leading to a steep sales drop for the therapy. In 2021, Tecfidera's sales dropped by a whopping 49% year over year to roughly $2 billion. Biogen's total revenue for the year decreased to $11 billion, 18% lower than the previous fiscal year.
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It's worth noting that Tecfidera isn't Biogen's only product whose revenue dropped last year. We can add spinal muscular atrophy treatment Spinraza to that list. In 2021, sales from this medicine came in at $1.9 billion, 7% lower than its 2020 level. Biogen blamed tougher competition for the decline.
Further, while Biogen plans to earn additional indications for Spinraza, the medicine will lose patent protection in the U.S. next year. Spinraza generated almost 31% of its revenue from the U.S. last year.
Spinraza and Tecfidera together accounted for 53.7% of Biogen's total revenue in 2021. Given all these factors, Biogen's lineup does not seem very healthy. That's why the company placed such hopes on Aduhelm. Unfortunately for the drugmaker, there are problems on that front, too.
2. Aduhelm's challenges
The approval of Aduhelm was a bit of a shock for many people since back in November 2020 a panel of experts convened by the U.S. Food and Drug Administration had strongly opposed the medicine getting the nod from the agency. But even though Aduhelm crossed this regulatory roadblock, things haven't been smooth sailing -- far from it.
In January, the U.S. Centers for Medicare & Medicaid Services (CMS) announced a preliminary plan under which Medicare would cover Aduhelm only for those patients with mild cognitive impairment due to AD who are enrolled in CMS-approved clinical trials. In simpler terms, this measure would severely restrict the availability of Aduhelm for Medicare patients.
The plan isn't guaranteed to be approved, though, and the definitive coverage decision will come next month. In the meantime, advocacy groups have rallied behind Aduhelm, trying to get the CMS to change its tune. No one knows what will happen to this coverage decision, but Biogen has a lot riding on it. Last year, Aduhelm racked up $3 million in revenue, which is less than the $14 million analysts expected in the third quarter alone.
Is Biogen a buy?
Biogen is rumored to be looking to acquire a smaller drugmaker to replenish both its lineup and pipeline. But that does nothing to improve the company's immediate prospects, which look highly uncertain. The best-case scenario for Biogen would be for the CMS to relax coverage restrictions on Aduhelm and for the medicine to finally live up to the hype -- or something close to it.
But even if the CMS gets behind Aduhelm, it is unlikely to be nearly as successful as it needs to be for Biogen to reverse course, and here's why. Even though many AD patients and their families will no doubt welcome Aduhelm, given the negative publicity, it seems likely that other patients, their families, and even some physicians might still be firmly on the side of the skeptics. Further, several other companies are working on potential AD treatments, including Eli Lilly.
Biogen also does have another investigational AD therapy in the works, along with many other pipeline candidates. In the long run, the company could recover from its current struggles. But at the moment, Biogen does not look like a particularly attractive stock. There are much better biotech stocks to consider buying right now.
