Biotech darling Biogen (NASDAQ:BIIB) had a rough day, ending down 6.6%, despite putting up some impressive year-over-year comparisons: revenue increased 20% year over year in the first quarter, and adjusted earnings per share were up 55%.

Of course, the decline in stock price is all relative. Shares are still up 18% year to date and 38% over the last year. When a company increases that much in value, everything needs to be perfect to keep the rally going.

It wasn't.

Source: Biogen.

Biogen's oral multiple sclerosis drug, Tecfidera, recently surpassed Avonex as the company's top-selling drug, making the biotech heavily dependent on Tecfidera for sales growth.

Sales of Tecfidera increased 63% year over year, which sounds just dandy until you notice that the $825 million Biogen sold in the first quarter was 10% less than it sold in the previous quarter. Biogen blamed everything except perhaps the weather for the slowdown:

  • One fewer shipping week in the U.S. versus the prior quarter
  • Increased discounts and allowances specific to the first quarter of 2015
  • Slight drawdown of inventory at specialty pharmacies
  • Updated pricing assumptions in Germany
  • Currency changes
  • Launch of Biogen's Plegridy
  • Overall slowing of the multiple sclerosis market
  • Last year's case of progressive multifocal leukoencephalopathy

Let's run through the excuses:

The number of shipping weeks is certainly the best excuse up there, since it isn't going to affect the growth trajectory. If you do the math, Biogen shipped $49.8 million worth of Tecfidera in the U.S. in the first quarter compared to $53.1 million per week in the fourth quarter.

The slight decline in weekly sales numbers was mostly due to the discounts mentioned, which are specific to the first quarter. If you add back in the $35 million that Biogen estimates it had to give up in discounts, the weekly sales figures jumps to $52.5 million. Add back some unknown amount that wasn't sold because pharmacies used their inventory and it looks like U.S. demand in the first quarter is pretty comparable to the fourth quarter.

The discounted pricing in Germany probably won't be a one-time issue, since mid-February the company has been using a discounted price, and will continue to do so until the official price is made public next month. At that point, at least quarter-over-quarter comparisons will include the new price, so this won't be an issue for measuring growth after that.

The stronger dollar accounted for $8 million less Tecfidera first quarter sales compared to the previous quarter. That accounts for about one percentage point of the aforementioned 10% quarter-over-quarter decline.

Add them all up and the numbers might get you back to sales near fourth quarter sales, but investors are looking for growth. The last three bullet points address that.

Plegridy taking some of the switches that might have gone to Tecfidera isn't particularly bad for Biogen, since it sells both drugs -- assuming the two drugs have similar gross profits on their sales.

The bigger issue is whether patients and their doctors are worried about progressive multifocal leukoencephalopathy, a potentially deadly brain infection. If the issue keeps patients from switching and the growth of the overall multiple sclerosis market is slowing, it'll make it hard for Biogen to keep Tecfidera growing.

Biogen started a new phase 3 study, called Inspire, to evaluate Tecfidera in a different type of multiple sclerosis called secondary progressive multiple sclerosis, or SPMS. If the trial is positive, it could give a boost to Tecfidera sales since there aren't any effective treatments for SPMS -- but the trial requires two years of data, so SPMS isn't going save Tecfidera anytime soon.

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