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Why Biogen's Better-Than-Expected Q1 Results Weren't Good Enough

It's fair to say that Biogen (NASDAQ: BIIB) is at a pivotal point. The company built a strong multiple sclerosis franchise that's now facing intense competition. It hopes to achieve success in treating Alzheimer's disease but must first jump a major hurdle by winning U.S. Food and Drug Administration (FDA) approval.

Biogen announced its first-quarter results before the market opened on Thursday with these factors in the minds of many investors. Those results apparently didn't give investors a warm and fuzzy feeling, though: The biotech stock slipped 4% in early trading. Here are the highlights from Biogen's Q1 update.

Image source: Getty Images.

By the numbers

Biogen reported revenue in the first quarter of $2.69 billion. This reflected a 24% decrease from the prior-year period revenue total of $3.53 billion. However, it narrowly beat the consensus Wall Street estimate of $2.65 billion.

The company announced Q1 net income of $410 million, or $2.69 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, Biogen posted GAAP earnings of $1.4 billion, or $8.08 per share.

Unsurprisingly, there was also a steep decline in the company's bottom line on a non-GAAP basis. Biogen recorded adjusted net income in the first quarter of $813 million, or $5.34 per share, compared to $1.6 billion, or $9.14 per share, in the prior-year period. This result still topped the average analysts' estimate of $5.04 per share, though.

Behind the numbers

Biogen faced increased competition for its products across the board. And the Q1 results showed it.

Sales for the biotech's multiple sclerosis (MS) franchise fell 26% year over year to $1.69 billion. The biggest loser was Tecfidera, with sales plunging to $479 million from nearly $1.1 billion in the prior-year period.

There were only two bright spots for the company's MS franchise. Biogen's royalties from sales of Ocrevus, which is marketed by Roche, jumped 29% to $209 million. Newer MS drug Vumerity also picked up momentum, with sales totaling nearly $74 million in Q1, compared to $2.4 million in the same quarter of 2020.

Another former growth driver for Biogen also continued to lose some of its luster. Sales of spinal muscular atrophy drug Spinraza slipped 8% year over year to $521 million. The decline would have been even worse without some help from currency fluctuations. Sales of the drug fell 12% on a constant-currency basis.

Even Biogen's biosimilars underperformed. The company announced biosimilars revenue of $205 million, down 6% on a reported basis and 13% on a constant-currency basis.

Looking ahead

Biogen is now a little more optimistic about its full-year 2021 results. It still expects full-year sales of between $10.45 billion and $10.75 billion. However, the company increased its earnings guidance. Biogen anticipates adjusted earnings per share will be between $17.50 and $19, up from its previous guidance of $17 to $18.50.

Why didn't investors react more positively to Biogen's better-than-expected Q1 results and its increased full-year earnings guidance? Probably for two reasons. First, beating low expectations with declining top and bottom lines doesn't inspire confidence. Second, Biogen's full-year outlook assumes that experimental Alzheimer's disease drug aducanumab will win FDA approval by June 7, 2021.

Approval for aducanumab seems iffy at best. The FDA advisory panel voted overwhelmingly against recommending approval. Even worse, three members of the panel took an unprecedented step by writing an opinion article in JAMA (Journal of the American Medical Association) underscoring why they're opposed to the drug's winning FDA approval.

It's hard to overstate just how important aducanumab is to Biogen's future. The reality is that the company's Q1 results are insignificant in comparison.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.


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