With its shares down by more than 22% in the last 12 months, it's clear that Biogen (BIIB -0.85%) isn't the high-flying growth stock that it used to be.
Since its failed attempt over the last year to get its fiercely criticized Alzheimer's disease drug Aduhelm approved for sale, the company's troubles have turned from bad to worse. Revenue and earnings from its core drug products are both down sharply over the last three years. Per its May 3 earnings report for Q1, its CEO since 2017 is departing now too.
Amidst so many problems and a high-profile departure, is there any hope for Biogen to return to the growth it saw in the early 2010s? To answer this question, let's start by appreciating the financial impacts of the recent goings-on to see how much they actually threaten the company's future.
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Setbacks abound
The latest major setback for Biogen came when the Centers for Medicare and Medicaid Services ruled that Aduhelm wouldn't be covered by either Medicare or Medicaid as a result of its questionable efficacy and safety characteristics. That effectively killed the company's market for the drug, which was intended to treat seniors with Alzheimer's disease, who would largely require government assistance to pay for treatment. It also spurred a fresh spree of layoffs, which could continue for some time.
Shutting down the global manufacturing and distribution infrastructure for Aduhelm is slated to deliver around $500 million in annualized savings. Though some residual research and development (R&D) activities for it will continue so that the small number of people who are currently taking it get the support they need, it's safe to say that Aduhelm's potential to bolster revenue is now conclusively finished.
Beyond that, Biogen's quarterly results point to a business in distress. Its Q1 revenue of $2.5 billion is a step down to the tune of 6% from last year, when it brought in nearly $2.7 billion. And its earnings per share (EPS) have collapsed from $5.34 to reach $3.62 merely a year later.
Multiple business segments are struggling. Its portfolio of multiple sclerosis (MS) drugs and biosimilar drugs both earned slightly less this year than they did last year, as did its spinal muscular atrophy (SMA) drug Spinraza, which has only been on the market for a few years so far. And to cap it all off, its quarterly cost of goods sold (COGS) has soared by 58% compared to last year.
However, things aren't nearly as bad as they might seem.
It'll probably recover, but it might take a while
Despite the fact that Biogen's investments in Aduhelm won't be paying off, there's little suggesting an imminent collapse. Biogen's debt load of $7.3 billion isn't very frightening when considering its cash holdings of $4.8 billion and its 2021 annual operating expenses of just over $6 billion. Remember, regardless of its recent problems, it's still profitable -- and Aduhelm wasn't the only project in the pipeline, either.
In fact, Biogen is in the process of two rolling regulatory submissions for a pair of programs that are nearly ready for commercialization, assuming they get approved. There's zuranolone for major depressive disorder (MDD), and also lecanemab for Alzheimer's disease. Beyond that, it plans soon to launch at least four new, late-stage clinical trials for other programs. And it has no fewer than 10 projects in phase 3 trials right now, out of a total of 32 that are in clinical-stage.
In short, Biogen has a lot of growth opportunities, at least a few of which will likely survive the clinical trials process to yield revenue at some point in the future. It's still set on laying claim to a slice of the nascent market for Alzheimer's therapies, and it's still focused on neuropsychiatric illnesses. Even when taking the Aduhelm fiasco into account, the company has a proven ability to profitably develop and commercialize drugs. And all of the above makes it very likely to make a comeback eventually.
All that being said, there are better opportunities out there for investors seeking growth within the healthcare sector right now. After all, other biopharma companies are growing their earnings steadily while avoiding major mishaps and leadership changes.
