It's been a forgettable year for Biogen (BIIB 0.88%). Total revenue is down year over year from $13.4 billion to $11 billion, and the company is guiding even lower for 2022. Management forecasts that non-GAAP diluted earnings per share (EPS) will free fall to between $14.25 and $16, down from $24.13 in 2020.
But the disheartening news doesn't stop there. Just last week, the company announced it had officially withdrawn its Alzheimer's drug, Aduhelm, from consideration for authorization in Europe. With this news, investors can't help but wonder what the future of this neurology-focused healthcare company will look like. Over the last few years, Biogen had hinged much of its future growth on its Alzheimer's disease pipeline, which appears to be in serious jeopardy at the moment.
Adding insult to injury, the Center for Medicare and Medicaid Services (CMS) finalized its own policy earlier this month, essentially stating that it will not pay for Aduhelm outside of clinical trials, and adding that it won't reconsider its stance until there is evidence the drug has meaningful clinical benefit. Ouch.
Image source: Getty Images.
A long road ahead
That said, Biogen's Alzheimer's disease infusion therapy is currently undergoing phase 4 post-marketing studies. One of these trials is unfortunately a single-arm study, meaning it won't be compared to anything except historical values -- and, it is not estimated to garner results until October 2026. In light of this ongoing approval saga, it's hard to imagine that the CMS (and other insurance companies) would pay up for a treatment proven on only a single-arm study, as these are generally considered lower-quality evidence.
Biogen does have another trial in the works, though. The ENVISION study, which is expected to enroll 1,500 patients starting in May 2022, is a double-blind placebo-controlled trial -- the cornerstone of quality clinical trials. Unfortunately, ENVISION is not expected to be completed until May 2027. That's a gut punch to investors banking on Alzheimer's treatments to fuel future growth, as they will have to wait at least five years for that thesis to play out.
The rest of Biogen's pipeline is rather bleak, too. BIIB093, Biogen's leading acute stroke therapy currently in phase 3 trials, has not statistically improved clinical outcomes at 90 days. Biogen's RNAi drug failed phase 3 trials for rare neuromuscular disorders, and its phase 3 depression therapy, Zuranolone, flunked trials in 2020. In other words, the pipeline cupboard is woefully barren.
A potential digital future
But: The company does have a digital healthcare segment in its infancy, and it seems that Biogen has high aspirations for this market. In the company's 2021 year-end presentation, this fledgling business segment was mentioned more often than Aduhelm. Currently, though, it has little on the market save for an app to help multiple sclerosis (MS) patients with symptom tracking and tips to improve quality of life. Still, investors may want to keep an eye on Biogen's smartphone-based digital measurement platform, which assesses various functions like limb control and mobility. These metrics can be monitored in-clinic or remotely for multiple sclerosis and neuromuscular disorders. It's still early yet, but Biogen could eventually build this into a small but profitable software-as-a-service (SaaS) business.
Biogen is also developing AI software to evaluate MRI brain imaging for multiple sclerosis evaluation as well as for changes seen during Aduhelm treatment. Both these developments -- the imaging AI and smartphone platform monitoring neurological disease -- are in their infancy and not currently ready for market.
What about its MS business?
While revenue from Biogen's blockbuster MS drug, Tecfidera, is typically a boon for the company, more recent MS franchise sales are floundering. Sales for fiscal year 2021 were $7.1 billion, down from $8.7 billion the year prior. This decline is primarily due to the 2020 loss of Tecfidera's patent protection in the U.S. Sales of the popular MS drug dropped from $3.8 billion in FY20 to just under $2 billion in 2021, and the treatment is also set to lose its EU patent protection in 2024. Fortunately, Biogen received U.S. approval in 2019 for a similar medication with fewer side effects, Vumerity. This new medication chalked up $410 million in U.S. sales last year and was approved in late 2021 in the EU.
Thankfully for Biogen, the rest of its MS franchise outside of Tecfidera and Vumerity remained relatively stable year over year -- $4.77 billion in 2020 versus $4.73 billion in 2021. So there may be a silver lining, as it appears the company's core MS franchise outside of Tecfidera has a stable floor.
Things are looking bleak for Biogen right now, and that's reflected in its share price. Its stock is down over 55% from its June 2021 52-week high, and down almost 14% year to date. Over the last decade, the stock has been trounced by the S&P 500, with Biogen shares up about 75% versus a 219% gain for the index.
Things might continue to worsen before they get better if Vumerity is not able to soften the Tecfidera's fast-approaching patent cliff blow. With a barren pipeline and no meaningful data from Aduhelm for the next five years, shareholders will have to rely on an inexperienced digital health service and newcomer Vumerity to stop the stock from its slide. For now, cautious healthcare investors may want to look at other companies on their watch list.
