Biogen (NASDAQ:BIIB) is not having a good week.
On Wednesday, the company released mixed early-stage data for its Alzheimer's disease drug, aducanumab. While the data weren't horrible, it didn't exactly increase investors' confidence that the phase 3 program will be successful.
And then today, Biogen said second-quarter revenue was only 7% higher than the year ago-quarter, and lowered revenue guidance for the year. The biotech now expects 2014 revenue to be 6% to 8% higher than 2014.
Many larger drugmakers would be happy with a 7% year-over-year increase in revenue, but Biogen had more growth priced in. Previous guidance was for year-over-year revenue growth of 14% to 16% this year.
Worse yet, the revenue miss came from Biogen's main growth driver, multiple sclerosis drug Tecfidera. It says a lot when a 26% year-over-year increase is considered a miss; but investors were hoping that international growth in Tecfidera could take over for stalling growth in the U.S.
Part of the subpar growth in Tecfidera has to do with a lower price for the drug in Germany -- international sales fell 8% quarter over quarter despite a 14% increase in volume. Fortunately, the headwind will go away once year-over-year comparisons factor in the new price, but international sales of Tecfidera are now working off a smaller base for future growth.
Management guided for flat sales of Tecfidera in the U.S. Most of the patients who are going to switch already have, so Biogen is mostly limited to capturing new patients. This number is offset by patients stopping the drug because either Tecfidera has stopped helping them reduce their flare-ups, or they're discontinuing treatment because of side effects, most notably gastrointestinal issues -- nausea, vomiting, diarrhea, and the like.
The launch in the EU came after the U.S. launch, so there's still potential for further growth, but the U.S. base -- $721 million in the second quarter -- is so much larger than international sales -- $163 million in the second quarter -- that it's going to take quite a bit of growth outside the U.S. to significantly increase overall sales of Tecfidera. And unfortunately, Biogen has run into competition from Sanofi, which has aggressively priced its competing oral multiple sclerosis drug, Aubagio.
Waiting for the next growth driver
Drug development is often a boom-and-bust industry -- or at least a boom-and-wait. When the growth spigot turns off, it's often going to get worse before it gets better. Unfortunately, it takes awhile to tap a new drug for further growth.
Biogen has plenty in its pipeline that could drive sales in the future. The biggest opportunity is the aforementioned aducanumab, but the phase 3 trials are still enrolling, and then require 18 months of treatment. As a result, Biogen won't have data for some time.
Biogen is trying to expand the labels for a few of its drugs -- multiple sclerosis drugs Tysabri and Tecfidera, and blood cancer drug Gazyva. If the clinical trials turn out positive, and the drugs are approved for additional indications, we could see further growth from the drugs.
Phase 2 data from ISIS-SMNRx looked good, but partner Isis Pharmaceuticals has made it clear that the companies plan on waiting for data from the phase 3 clinical trials, which are still enrolling, before proceeding.
Biogen's anti-LINGO drug has the potential to be a blockbuster because it attacks multiple sclerosis in an entirely different way than current therapies do. Unfortunately, we're still waiting for phase 2 data, which won't be available until next year. And then, if the trial is positive, Biogen will likely have to run phase 3 trials to get the drug approved.
Biogen's quickest route to a happy, joyful, cheery, blissful year likely is through an acquisition. The $4.5 billion that Biogen has sitting on its books, and the company's potential to take out loans to make an even larger purchase, could buy a lot of growth.