5 Reasons Why Biogen Shares Will Drop 36% in 2024

Although it launched the first Alzheimer’s drug to cure the disease, Biogen’s posts did not reflect the tremendous scientific success achieved last year. The stock has fallen by more than a third since hitting $267 in early January; This reflects investors’ concerns about the company’s future. The stock opened at $171 on Tuesday.

While Leqembi has made some progress, the launch has been slow and competition has begun via Eli Lilly’s Kisunla. Biogen has a few tricks up its sleeve for future pipeline options, most notably BIIB080, the much-discussed Alzheimer’s sequel, but overall investors are taking a cautious approach.

“Biogen remains a contrarian stock as investors remain skeptical of Alzheimer’s and its pipeline,” Stifel analysts wrote after Biogen’s third-quarter earnings release on Oct. 30.

But many analysts, including Stifel, are urging investors to look at the “big picture,” arguing that now is a good time to buy Biogen’s shares.

Below we take a look at five big drivers of Biogen’s share price.

Leqembi Headwinds

As the world eagerly awaited a new option for Alzheimer’s, Leqembi’s revenue continued to be lower than expected as Biogen worked to continue the product’s launch. The drug brought in $67 million in the third quarter, $39 million of which was in the United States.

The company told investors it wasn’t a demand issue, but that healthcare systems had not yet adapted. Patients cannot receive the PET scans needed to begin treatment, and infusion time can be burdensome.

Biogen expects sales to continue rising from quarter to quarter and is trying to move the needle faster with its subcutaneous formulation plans; Wider use of blood-based diagnostics may help alleviate the need for invasive PET scans. The company has also increased its sales force in the market with new boots that will be available starting September 1.

While Leqembi is selling, it is costing Biogen and its partner Eisai a lot to support the launch. Pharmaceutical expenses for partners were $242.3 million; this figure dwarfs global sales.

The drug is still not approved, despite European regulators rejecting it. It is expected to be re-examined next year.

Looking further into the future, Biogen is testing Leqembi in a Phase III trial called AHEAD 3-45 to prevent or delay Alzheimer’s in preclinical or asymptomatic patients. Registration was completed in October with 1,400 patients. This could significantly expand the patient population.

Biogen now also has to deal with Eli Lilly after its rival Alzheimer’s drug Kisunla was approved earlier this year. But analysts at William Blair suggested that introducing a second drug that destroys amyloid might actually provide a net benefit. Leqembi was able to differentiate due to a reduced incidence of amyloid-associated imaging abnormalities (ARIAs), a significant safety concern that can suggest bleeding in the brain.

“From a stock perspective, we accept that the launch will continue to be a ‘show me’ story and moving forward will be difficult (the same can be said for the stock); however, given Biogen’s valuation, we continue to see growth in the Alzheimer’s franchise to be positive,” wrote William Blair.

pipeline

Analysts were mostly unimpressed with Biogen’s early projects and pushed for more business development to bring additional assets to the pipeline.

But Jefferies noted a few silver linings in the recent emergence of felzartamab, a drug from Germany. HI-Bio processin chronic kidney disease IgA nephropathy (IgAN). The company submitted Phase II data at the end of October verification of stable kidney function and lasting treatment effects for more than 18 months after the last dose. Biogen will expand felzartamab into Phase III trials in IgAN, antibody-mediated kidney transplant rejection, and primary membranous nephropathy next year.

UCB-partnered dapirolizumab pegol is also starting a new application second Phase III test After achieving the primary objective of a late-stage trial in systemic lupus erythematosus (SLE). The drug showed clinical improvement in patients with moderate to severe disease in the Phase III PHOENYCS GO study. The clinical program will now expand with a second study that will address patients with unmet needs in SLE.

Jefferies wrote about felzartamab and dapirolizumab pegol: “While both are big-picture positives, the data is a long way off and expectations for both are low, but there could be upside surprises if positive.”

Biogen also has a deep Alzheimer’s pipeline, specifically BIIB080, which is addressing tau pathology in a Phase II trial. Registration is complete but data is not expected until 2026.

Executives pegged the pipeline as having a top revenue potential of $14 billion, William Blair said.

Launching Into the Unknown

It’s not just Alzheimer’s where Biogen is breaking new ground. Truist Securities noted that the new products, Qalsody for ALS, Skyclarys for Friedreich’s ataxia (FA), and Zurzuvae for postpartum depression, are all recently approved Biogen drugs in indications for which there is little precedent.

“In each case, Biogen is building a market where previously existing infrastructure did not exist,” Truist wrote. This is a challenge for any company, even one the size of Biogen.

But if anyone can do it, it’s Biogen. “Biogen has developed significant capability to commercially execute its rare disease portfolio,” BMO Capital Markets said. he said. This includes Spinraza for spinal muscular atrophy and Skyclarys for FA and, to a lesser extent, Qalsody for ALS. Analysts cautioned that Biogen will likely see the benefits of these programs eventually, but investors should be patient.

“Q24 revenues demonstrated that growth from these assets likely will not occur overnight and additional business development may be necessary to deliver stronger revenue growth,” BMO Capital Markets said.

Spinraza sales fell $67 million to $381 million in the third quarter, which Biogen attributed to an annual contract loss in Russia. The drug has also been hurt by competition from Novartis’ gene therapy Zolgensma. Biogen hopes Spinraza could potentially return to growth alongside Zolgensma. Other emerging competitors include Genentech’s oral treatment Evrysdi.

“There are a lot of patients who are going back to SPINRAZA after switching to a competitor, and maybe they’re realizing that the efficacy isn’t there,” said Alisha Alaimo, president and president of Biogen’s North America.

Multiple Sclerosis Franchise

While the company has long been known for its multiple sclerosis franchise, that part of the business has been in decline for several quarters as Biogen heads toward a steep patent cliff. The portfolio fell 9% in the third quarter to $1.05 billion due to “competitive dynamics,” according to CFO Mike McDonnell. The Tecfidera patent will expire in February 2028. Tysabri has seen biosimilar entrants in Europe; The same thing hasn’t happened yet in the US, but competition for these patents will soon begin.

Although this problem is not new, Biogen may need to take some significant business development steps to overcome this problem. “While management is not a fan of buying revenue to fuel growth, this may become a more compelling option as the MS franchise continues to erode,” BMO wrote.

Deal or No Deal

With all this uncertainty, Jefferies said that while Biogen remains fairly acquisitive, investors want to see more deal activity to take the business into the future. took Reata Pharmaceuticals to $7.3 billion in September 2023 and HI-Bio to $1.15 billion in July.

“Biogen continues to have multiple assets that could fuel growth in the future (Spinraza, Skyclarys, etc.), but investors may need to be more patient or wait for more transformative (business development) to see that strong growth — a possibility BMO Capital Markets said management He stated that he looks increasingly comfortable with each quarter.

Biogen said it has about $8 billion to $10 billion to spend on partnerships or acquisitions to fuel growth. CEO Chris Viehbacher said the company has been “in the neurology and neuroscience space for a long time,” suggesting deals could fall outside of those traditional focus areas. He’s also pleased with Biogen’s immunology work, especially given its $1.15 billion acquisition of HI-Bio earlier this year. But there are still plenty of business development opportunities in this area.

Viehbacher suggested that rare diseases are an area where Biogen has the ability to do more while avoiding Big Pharma-saturated indications like atopic dermatitis or rheumatoid arthritis.