Biogen (BIIB)’s new president and CEO Christopher A. Viehbacher has occupied the proverbial corner office for three months, so investors were expecting him to announce a new round of cost cuts when he addressed analysts Wednesday to discuss the company’s fourth-quarter and full-year 2022 results on the company’s quarterly conference call.

After all, Biogen finished 2022 with a 7.4% decline in revenue, to $10.173 billion, including a Q4 revenue decline of 6.9%, to $2.544 billion. The company blamed falling sales of its top-selling drug, the multiple sclerosis (MS) treatment Tecfidera® (dimethyl fumarate) due to competition from cheaper generics, as well as declining sales of interferon drugs such as Avonex® (interferon beta-1a) and Plegridy® (peginterferon beta-1a) as MS patients have switched to oral disease-modifying therapies and monoclonal antibodies.

Instead, Viehbacher and other top Biogen executives guided investors to a “mid-single digit revenue decline” for 2023—while playing up potential revenue the company stands to gain in future years from new product launches—namely the Alzheimer’s disease drug Leqembi® (lecanumab-irmb), partnered with Eisai; and the depression drug zuranolone, partnered with Sage Therapeutics.

Viehbacher also stated Biogen’s case for going slow on further expense reductions, while adding that the company was on track to achieve the $1 billion in cost savings it launched last year. That effort helped Biogen achieve improved Q4 and full-year results: Net income during October-December 2022 reached $549.5 million, compared with a $20.5 million net loss a year earlier. For all of last year, Biogen generated net income of $2.962 billion, 71% above the $1.728 billion racked up in 2021.

Biogen cut its research-and-development (R&D) expenses 11% last year to $2.231 billion, including $601.6 million spent during Q4 (down 14% year-over-year). The company also lowered its selling, general and administrative (SG&A) expense 10% in 2022, to $2.404 billion, including $632.8 million in the fourth quarter (down 20% from Q4 2021).

Viehbacher asserted that Biogen was indeed looking at cutting costs beyond the $1 billion in R&D and SG&A.

“We’re prioritizing the near-term opportunities and really looking at our cost base on a systematic basis,” Viehbacher said. “In R&D, we are looking at this whole prioritization exercise. And that means if you want to save money to a degree you have to—you may have to cut some programs. And that’s not something that you want to do quickly. You need to go and look at each program thoroughly, determine probabilities of success, cost to complete a whole bunch of other things.”

As for SG&A, most of what Biogen is spending goes to support its MS drug franchise. “The MS franchise still supports most of our revenue in the business. And so, one has to be careful about how much we want to reduce that spend by, but clearly, that’s a declining revenue base.”

Investor Gloom, Analyst Hope

Viehbacher’s cautious comments hardly soothed the nerves of investors, who have seen Biogen’s shares tumble 33% since June 2021, when shares closed at $414.71 soon after the FDA approved Alzheimer’s drug Aduhelm® (aducanumab), which like Leqembi was co-developed with Eisai. Aduhelm’s failure to gain reimbursement triggered the $1 billion in cost cutting, and the departure of Viehbacher’s predecessor as CEO Michel Vounatsos.

Investors punished Viehbacher and Biogen by sending company shares falling 3.5% on Wednesday, from $289.08 to $278.98, followed by another 3% dip, to $271.53 on Thursday—not huge selloffs, but not the votes of confidence Viehbacher might have wanted from Wall Street either.

However, four analysts viewed Viehbacher’s caution more positively.

“Good things take time,” Jefferies equity analyst Michael J. Yee summed up in the headline of his research note, which maintained the firm’s “Buy” rating on Biogen.

Yee cited as reasons several potential positive developments this year that could boost Biogen’s stock price. One is Viehbacher’s stated intent of replenishing Biogen’s pipeline by acquiring “de-risked” candidates with positive early to mid-phase clinical data, especially in autoimmune, psychiatry, and rare disease indications

“I tell people there wasn’t a lot of point hiring me if you don’t want to go do deals,” Viehbacher said.

More deals away from the company’s declining MS franchise would be welcomed by investors, Yee observed: “Investors also want to see the potential clarity on pipeline change. It would be nice to see reduced expenses and higher EPS [earnings per share]. We think it would be more valuable for BIIB to re-invest the money into novel pipeline opportunities.”

Other reasons Yee cited include the possibilities of CMS reimbursement for Leqembi after full FDA approval, and further cost reductions.

“There was some expectation of more action on cost reductions,” Yee wrote, noting that Biogen’s costs exceed those of its biopharma after excluding the royalty revenues Biogen receives on U.S. sales of MS drug Ocrevus® (ocrelizumab), partnered with Roche and its Genentech subsidiary. “Hence we see [Wednesday] as a buying opportunity for events over course of the year that can get stock back up as investors get more comfortable with the new mgmt and new improved business,” Yee added.

Marc Goodman, Senior Managing Director, Neuroscience with SVB Securities, kept his firm’s “Outperform” rating on Biogen stock. He noted that Biogen’s Q4 results beat SVB’s estimate of $2.5 billion, and further exceeded the $2.45 billion predicted by a consensus of analysts. Biogen’s non-GAAP fourth quarter earnings per share (EPS) of $405 surpassed forecasts by SVB ($3.56) and the consensus ($3.49).

“We look forward to additional commentary from the new CEO with regards to regulatory updates and commercial preparations for the key products including Leqembi and zuranolone, as well as potential cost savings or restructuring program in 2023.

Matthew Harrison, who focuses on biopharmas with market capitalizations of $10 billion and up as Head of Biotech Industry Research for Morgan Stanley, raised his firm’s 12-month price target on Biogen shares nearly 2%, from $345 to $351. Phil Nadeau, PhD, Managing Director, Health Care-Biotechnology for Cowen, went a little further, raising his firm’s price target 5% from $300 to $315.

However, Brian Abrahams, MD, Managing Director and Co-Head of Biotechnology Research for RBC Capital Markets took a more bearish perspective, lowering his firm’s price target 7% from $359 to $333, though he maintained the firm’s “Outperform” rating on Biogen stock.

Leaders and laggards

  • Frequency Therapeutics (FREQ) shares cratered 81%, from $3.93 to $0.7649, on Monday after the company halted development of lead candidate FX-322 for sensorineural hearing loss (SNHL) and eliminated about 55% of its workforce. FX-322 failed the Phase IIb FX-322-208 trial (NCT05086276) when data from the 142-patient study showed no statistically meaningful difference at day 90 between patients dosed with FX-322 and placebo patients. Frequency’s workforce will shrink to 22 from about 50 in a restructuring intended to extend the company’s financial runway into 2025. Frequency also halted development of another SNHL candidate, FX-345, leaving the pipeline with one preclinical program focused on remyelination in multiple sclerosis.
  • Hillstream BioPharma (HILS) shares climbed 19% on Monday, from $1.59 to $1.89, the third straight week the company’s stock saw a one-day double-digit gain. Hillstream said it agreed to grant the Applied Biomedical Science Institute an exclusive option to license technology for HER2 and HER3 Conformational Domain Bridging Epitopes in human monoclonal antibodies to develop proprietary multi-format biologics—bi- and tri-specific antibodies, antibody drug conjugates, CAR-T and CAR-NKs, in Quatramers and Quatrabodies—against drug resistant cancers including HER2-positive metastatic breast cancer, gastric cancer, lung cancer and ovarian cancer. The value of the agreement was not disclosed.
  • Soligenix (SNGX) shares skidded 31% between Tuesday and Wednesday, from $5.80 to $4.02, before rebounding 2% to $4.10, all after the company said it received from the FDA a Refusal to File letter for its HyBryte™ (synthetic hypericin) new drug application (NDA) to treat early stage cutaneous T-cell lymphoma. Soligenix said the FDA determined that the NDA, submitted in December 2022, “was not sufficiently complete to permit substantive review,” without elaborating. “We are fully determined to work with the FDA staff as quickly as possible to better understand the open issues and clarify the potential path to successfully resubmitting our application,” stated Soligenix President and CEO Christopher J. Schaber, PhD.
  • Sorrento Therapeutics (SRNE) shares nosedived 72% Monday, from $0.94 to $0.26, after the company and its wholly-owned direct subsidiary Scintilla Pharmaceuticals filed for Chapter 11 bankruptcy protection. Sorrento reported over $1 billion in assets and approximately $235 million in liabilities—but faced short-term liquidity woes after losing a $175 million arbitration award to NantCell and Immunotherapy NANTibody—$50 million of which could be enforced immediately. Sorrento said Scilex is not a debtor and will continue to operate its business as usual. “Sorrento sought chapter 11 relief to safeguard business operations and its ability to continue developing life-saving therapeutics, while protecting and maximizing value for stakeholders,” said Chairman and CEO Henry Ji, PhD.
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