A slow launch for Alzheimer’s medicine Leqembi, a lackluster pipeline and a challenging drug launch environment are just a few of the factors that have sent Biogen’s shares down this year.
Although it launched the first disease-modifying Alzheimer’s drug ever, Biogen’s shares have not reflected the monumental scientific achievement over the past year. The stock has fallen by more than one-third since hitting a high of $267 in early January, reflecting investors’ worries over the company’s future. The stock opened at $171 on Tuesday.
While Leqembi is making some headway, the launch has been slow and competition has entered by way of Eli Lilly’s Kisunla. Biogen has a few tricks up its sleeve for future pipeline options, particularly much-discussed Alzheimer’s follow-up BIIB080, but overall, investors are taking a cautious approach.
“Biogen remains a contrarian stock as investors are skeptical on Alzheimer’s and the pipeline,” Stifel’s analysts wrote in the aftermath of Biogen’s third quarter earnings call on October 30.
But many analysts including Stifel are recommending that now is a good time to buy Biogen’s stock, urging investors to look at the “big picture.”
Below, we take a look at five major drags on Biogen’s share price.
Leqembi Headwinds
While the world has been eagerly awaiting a new option for Alzheimer’s, Leqembi revenue has continued to be lower than expected as Biogen works to sustain the product’s launch. The drug brought in $67 million for the third quarter, including $39 million in the U.S.
The company told investors that it’s not a matter of demand, but healthcare systems simply haven’t adapted. Patients are not receiving the PET scans needed to begin treatment and the infusion time can be burdernsome.
Biogen is expecting sales to continue growing quarter-over-quarter and is trying to move the needle faster with plans for a subcutaneous formulation, while wider use of blood-based diagnostics could help alleviate the need for the invasive PET scans. The company also just boosted its sales force into the market, with new boots on the ground starting September 1.
While Leqembi is making sales, it’s still costing Biogen and partner Eisai a pretty penny to support the launch. Expenses related to the drug were $242.3 million for the partners—a number that eclipses global sales.
The drug is still not approved in Europe after regulators there rejected it. It’s expected to be re-examined next year.
Looking even further into the future, Biogen is testing Leqembi in a Phase III trial called AHEAD 3-45 to prevent or delay Alzheimer’s in patients who are preclinical or asymptomatic. Enrollment finished up in October with 1,400 patients. That could significantly expand the patient population.
Biogen also now has Eli Lilly to contend with after its rival Alzheimer’s drug Kisunla was approved earlier this year. But William Blair analysts suggested that the entry of a second amyloid-busting medicine could actually be a net benefit. Leqembi could differentiate because of its reduced incidences of amyloid-related imaging abnormalities (ARIA), a key safety concern that can suggest bleeding in the brain.
“From a stock perspective, we acknowledge the launch will continue to be a ‘show me’ story and tough to get ahead of (the same could be said for the stock); however, given Biogen’s valuation, we continue to see upside from growth in the Alzheimer’s franchise,” William Blair wrote.
Pipeline
Analysts have been mostly unimpressed by Biogen’s early pipeline, pushing for more business development to bring additional assets into the queue.
But Jefferies noted a few recent glimmers of hope from felzartamab, a drug acquired in the HI-Bio transaction, in the chronic kidney disease IgA nephropathy (IgAN). The company presented Phase II data at the end of October confirming stable kidney function and sustained treatment effects more than 18 months after the final 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 moving into a second Phase III test after achieving the main goal of a late stage trial in systemic lupus erythematosus (SLE). The drug demonstrated clinical improvement in patients with moderate to severe disease in the Phase III trial PHOENYCS GO. The clinical program will now expand with the second study to address patients with unmet needs in SLE.
“While both are positive developments in the big picture, data is far away and both have low expectations but could surprise to the upside if positive,” Jefferies wrote of felzartamab and dapirolizumab pegol.
Biogen also has a deep Alzheimer’s pipeline, particularly BIIB080, which is tackling tau pathology in a Phase II trial. Enrollment is completed but data is not expected until 2026.
William Blair noted that executives have pegged the pipeline as having potential for $14 billion in peak revenue.
Launching Into the Unknown
It’s not just Alzheimer’s where Biogen is paving new ground. Truist Securities noted that new products Qalsody for ALS, Skyclarys in Friedreich’s ataxia (FA) and Zurzuvae in postpartum depression are all Biogen drugs with recent approvals in indications where there’s little precedent.
“Biogen is building a market in each case where there wasn’t previously existing infrastructure,” Truist wrote. That’s a tough haul for any company, even one the size of Biogen.
But if anyone can do it, it’s Biogen. BMO Capital Markets said, “Biogen has developed significant prowess in commercially executing on its rare disease portfolio.” This includes Spinraza for spinal muscular atrophy and Skyclarys for FA, and to a lesser extent Qalsody for ALS. Biogen is likely to reap the benefits of these programs eventually, but investors need to be patient, anaylsts warned.
“Revenues in 3Q24 highlighted how growth from these assets is not likely to be overnight and additional business development may be required to drive more robust topline expansion,” BMO Capital Markets wrote.
Spinraza sales dropped $67 million to $381 million for the third quarter, which Biogen attributed to the loss of an annual tender in Russia. The drug has also suffered due to competition from Novartis’ gene therapy Zolgensma. Biogen is hoping that Spinraza can return to growth, potentially in combination with Zolgensma. Other emerging competitors include Genentech’s oral treatment Evrysdi.
“There’s a lot of patients that are returning back to SPINRAZA once they’ve switched away to a competitor, and they realize that maybe the efficacy isn’t there,” said Biogen’s Alisha Alaimo, head and president of North America.
Multiple Sclerosis Franchise
Though the company was long known for its multiple sclerosis franchise, this portion of the business has been in decline for several quarters as Biogen heads for a steep patent cliff. The portfolio declined 9% to $1.05 billion in the third quarter because of “competitive dynamics,” according to CFO Mike McDonnell. A patent for Tecfidera is set to expire in February 2028. Tysabri has seen biosimilar entrants in Europe; the same has not happened yet in the U.S., but competition is coming for these patents soon.
While this issue is not new, Biogen may need to take some major business development steps to overcome it. “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 investors want to see more deal activity to secure the business into the future, even though Biogen has been plenty acquisitive. It picked up Reata Pharmaceuticals for $7.3 billion in September 2023 and HI-Bio for $1.15 billion in July.
“Biogen continues to have multiple assets which could drive growth in the future (Spinraza, Skyclarys, etc.), but investors may just need to be more patient to see this robust growth, or wait for more transformative [business development] — a possibility management appears to be more and more comfortable with every quarter,” BMO Capital Markets wrote.
Biogen has said it has about $8 billion to $10 billion to spend on partnerships or acquisitions to supplement growth. CEO Chris Viehbacher has said the company is “long in neurology and neuroscience,” suggesting that deals may fall out of those traditional areas of focus. He’s also satisfied with Biogen’s immunology work, especially considering the buyout of HI-Bio for $1.15 billion earlier this year. But there remains plenty of business development opportunity in that space.
Viehbacher suggested rare disease as an area where Biogen has the ability to do more while avoiding saturated Big Pharma indications like atopic dermatitis or rheumatoid arthritis.
https://www.biospace.com/business/5-reasons-biogens-shares-have-dropped-36-in-2024
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