Biogen (BIIB) had a lot of news to share with investors this past week as it reported fourth-quarter and full-year 2023 results—much of it disappointing.

Sales of Alzheimer’s drug Leqembi® (lacanemab) were lower than anticipated, as were U.S. sales of Friedreich’s ataxia (FA) treatment Skyclarys (omaveloxolone), which won European Commission approval on Tuesday, not to mention sales of its flagship multiple sclerosis (MS) drug portfolio. Fourth-quarter earnings and revenue also fell short of expectations, as Biogen worked to eliminate 1,000 jobs (11.5% of its workforce) among other cost-cutting actions, and restructured its pipeline after a slow start.

Individually those are not major headwinds, but together they combined to send shares down 10.5% this week, to $219.08 Friday from $244.74 on February 12, before the release of the Q4 and full-year 2023 results the following morning.

Investors clearly were less than fully reassured as Biogen’s president and CEO Christopher A. Viehbacher insisted things were headed on the right track in the year since he took the company’s day-to-day helm.

Viehbacher has led efforts to build sales outside of its flagship franchise in MS, where several aging blockbusters face loss of exclusivity in coming years. Those efforts have started paying off in Biogen’s overall rare disease and biosimilars portfolios, which both showed small year-over-year gains during Q4 and all of 2023.

“We’ve made substantial progress,” he told analysts February 13 on the quarterly earnings call. “As I have said on a number of occasions, once we can get Biogen growing, we really see Biogen becoming a growth company for the foreseeable future.”

That vision has yet to translate to Biogen’s overall results. The company finished the fourth quarter with a 55% plunge in net income, to $248.9 million from $549.5 million, on revenue that fell 6%, to $2.386 billion from $2.544 billion. For full-year 2023, Biogen’s net income nosedived 61% to $1.162 billion from $2.961 billion, on revenue that slid 6%, to $9.836 billion from $10.173 billion.

Downgrade, lower price targets

Viehbacher’s assurance notwithstanding, Biogen’s lower-than-expected top- and bottom-line results and sales falloffs for key products led Wells Fargo to downgrade their ratings on Biogen stock, while analysts from that firm and 14 others lowered their 12-month price targets on the company’s shares.

Wells Fargo downgraded Biogen from “Overweight” to “Equal Weight.” The firm cited three factors:

  • A limited opportunity for a near-term inflection point given what appears to be slowing U.S. sales for Skyclarys.
  • The likelihood that European sales of Skyclarys won’t grow to a significant inflection point until 2025 despite EU approval earlier this week.
  • Slow uptake for Alzheimer’s treatment Leqembi®

Biogen reported $55.9 million in Q4 product sales for Skyclarys, which launched in the U.S. this past summer, soon before Biogen acquired the company that developed the drug, Reata Pharmaceuticals, for approximately $7.3 billion. Reata made history in April 2023 when it won the FDA’s first-ever approval for a drug indicated to treat FA, but was delayed several weeks in commercially launching Skyclarys in the U.S. because it first needed to resolve a manufacturing issue affecting the purity of the drug.

That’s short of analyst consensus estimates cited by several firms ranging from $61 million to $64 million, with Brian P. Skorney, senior research analyst with Baird, projecting $66.7 million.

Two reasons for the shortfall: Skyclarys has yet to be approved for children under 16, though Biogen is pursuing that indication. Also, initial sales were buoyed by Skyclarys being administered to a large number or “bolus” of FA patients that were waiting to get the drug, a number that has since diminished. Biogen has projected more modest growth going forward, with additional sales to come starting this year now that Skyclarys has European approval.

About 1,000 patients are on therapy with Skyclarys following FDA approval in February 2023, up from 800 in Q3, according to Biogen. “A 25% increase but definitely on the lower end of expectations,” Jefferies equity analyst Michael J. Yee wrote in a research note.

Biogen has tamped down expectations of Skyclarys patient population growth this year: “I don’t think we’re necessarily going to get another 20% this year, but, you know, we’re growing every month. And certainly, Skyclarys is contributing significantly to our return to growth in 2024,” Viehbacher said.

Biogen has attracted 20% of the roughly 4500-patient potential population treated with the drug within six months of launch: “There’s an awful lot of complexity to launching these rare diseases, and I think this is where Biogen has an awful lot of strength,” Viehbacher said.

The complexity, he continued, reflects challenges such as moving the drug from manufacturing to shipment—a time duration he said has been reduced 45%—plus logistics with specialty pharmacies and payer reimbursement (about two-thirds of payers have agreed to cover Skyclarys), and patients navigating their paths to treatment with help from patient services and family access managers.

“While Skyclarys uptake has been good, incremental growth would be key to watch,” Mohit Bansal, equity analyst with Wells Fargo, and three colleagues observed in a research note.

Leqembi: Disappointment and hope

More disappointing so far, they said, was patient uptake of Leqembi, which Biogen co-developed with Eisai. Leqembi generated only $7 million in in-market product revenue during the fourth quarter, and $10 million for all of 2023, both recorded by Eisai under their collaboration agreement.

“The launch continues to face infrastructure challenges,” Myles R. Minter, PhD, and Sarah Schram, PhD, of William Blair wrote in a research note. “There are current bottlenecks related to scheduling around access to imaging (PET/MRI) in addition to neurologist visits.” Minter and Schram maintained their firm’s “Outperform” rating.

Despite those hurdles, according to Biogen, some 2,000 patients are on treatment yet as many as 3,800 are cleared for treatment through placement on Alzheimer’s disease registries.

“That suggests we’re getting about 260, 265 patients per week in the month of January. And as far as we can tell, that’s about a 56% increase over what we were seeing in December. So, we are clearly seeing that there is demand for the product,” Viehbacher said.

Eisai has said some 8,000 patients have been identified and are waiting for potential treatment, below the company’s earlier forecast that 10,000 patients would be on Leqembi by the end of its fiscal year March 31. Also, Biogen and Eisai are pursuing approval for a subcutaneous formulation of Leqembi, with an application expected to be filed in March, and a potential approval occurring in early 2025, according to Jefferies’ Yee.

Notwithstanding encouraging signs, Baird’s Skorney wrote: “The slow Leqembi launch is hampering the stock’s upside and the complexities of getting patients on treatment adds uncertainty to whether the launch will get going meaningfully in 2024.”

Viehbacher said he remains positive, based on 70 of the top 100 IDNs (integrated delivery networks or healthcare systems) having made positive pharmacy-and-therapeutics (P&T) committee decisions in favor of patients taking Leqembi, and 80% of IDNs have since ordered the drug.

“If we talk to the people who are doing the PET scans, the MRIs, the people who sell the blood diagnostics, everybody is reporting increased activity and volume,” Viehbacher said. “(Eisai)’s belief is that for all the patients on treatment, there are at least threefold or fourfold of those who are actually in waiting rooms.

“Very solid progress”

“We do believe we’re making very solid progress, and we believe that we have validated the go-to-market model,” Viehbacher added. “We continue to believe in the long-term importance of Leqembi both to patients and to our financial results.”

To improve upon that progress this year and beyond, Biogen will expand its total U.S. sales field force by about 30%, the CEO continued, without saying how many new salespeople would be hired as a result.

“It remains to be seen if more effort would bring incremental investors,” Bansal and colleagues wrote. “Leqembi uptake thus far creates too many concerns to get comfortable around these numbers. We suspect new investors may not want to come in at this point.”

Bansal and colleagues at Wells Fargo lowered the firm’s price target on Biogen shares 24%, from $315 to $240. Skorney at Baird only trimmed his firm’s target by 5%, from $333 to $316 a share, as did Yee at Jefferies, from $300 to $285 a share. Skorney and Yee maintained their firms’ ratings on Biogen (“Outperform” and “Buy”, respectively).

Analysts at 12 other firms also lowered their price targets on Biogen stock:

  • Carter Gould (Barclays Capital)—Down 10%, from $255 to $230; maintains “Equal Weight” rating.
  • Hal Goetsch (Scotiabank)—Down 9.5%, from $304 to $275; maintains “Buy” rating.
  • Colin Bristow (UBS)—Down 9%, from $276 to $250; maintains “Neutral” rating.
  • Matthew Harrison (J.P. Morgan)—Down 5%, from $364 to $346; maintains “Overweight” rating.
  • Christopher Raymond (Piper Sandler)—Down 7%, from $350 to $325; maintains “Overweight” rating.
  • Brian Abrahams (RBC Capital)—Down 4%, from $379 to $364; maintains “Outperform” rating.
  • Geoff Meacham, PhD (BofA Securities)—Down 3%, from $290 to $280; maintains “Neutral” rating.
  • Evan Seigerman (BMO Capital)—Down 3%, from $295 to $285; maintains “Outperform” rating.
  • Ami Fadia (Needham)—Down 2%, from $305 to $300; maintains “Buy” rating.
  • Phil Nadeau (TD Cowen)—Down 2%, from $305 to $300; maintains “Outperform” rating.
  • Jay Olson (Oppenheimer)—Down 2%, from $295 to $290; maintains “Outperform” rating.
  • Sumant Kulkarni (Canaccord Genuity)—Down 2%, from $310 to $305; maintains “Buy” rating.

More growth factors

Kulkarni cited two additional factors besides Skyclarys and Leqembi he’s waiting to see play out this year. One is the extent of growth in sales for Zurzuvae® (zuranolone), a treatment for postpartum depression in adults co-marketed by Biogen and Sage Theapeutics that generated $2 million in revenue during Q4, its first quarter on the market.

The other factor is Biogen’s ongoing cost-cutting effort, called “Fit for Growth.” Biogen said Fit for Growth is expected to generate about $1 billion in gross savings and $800 million net by 2025.

Since Fit for Growth was launched last year, Biogen said, it has racked up approximately $200 million of savings. The company expects to realize approximately half of the planned overall net savings by the end of 2024, and the rest by the end of 2025. The numbers do not include Biogen’s 50% share of sales and marketing expenses for its Leqembi collaboration with Eisai.

For 2024, Biogen expects operating income to grow at a low-double digit percentage over 2023, to be driven by improved cost of sales as a percentage of revenue, as well as lower operating expenses due to Fit for Growth.

“In the near- to mid-term,” Kulkarni wrote in a research note, “we believe three factors remain important for the stock: 1) regulatory interactions on maintenance dosing and subcutaneous Leqembi; 2) quality of launch ramps on Skyclarys (United States and now Europe) and BIIB/SAGE’s Zurzuvae; and 3) any further inroads on cost-optimization, while playing a good defense on the legacy revenue base that might help BIIB beat its 2024 outlook.”

Leaders and laggards

  • Applied Therapeutics (APLT) shares doubled, rising 101% over two days—from $2.68 to $3.75 on Thursday, then to $5.38 on Friday—after the company announced positive interim 12-month results from the ongoing Phase III INSPIRE trial (NCT05397665), meeting the study’s primary endpoints and several key secondary endpoints. INSPIRE assessed the effect of once-daily oral govorestat (AT-007) in 56 patients ages 16–55 with Sorbitol Dehydrogenase Deficiency (SORD) in the United States and Europe. Govorestat is a central nervous system (CNS) penetrant aldose reductase inhibitor designed to treat several rare neurological diseases—including Galactosemia, SORD, and PMM2-CDG—by blocking the conversion of glucose to sorbitol.
  • Aurinia Pharmaceuticals (AUPH) shares tumbled nearly 25% on Thursday, from $7.97 to $6.02, after the company said it would eliminate at least 25% of its workforce by the end of the first quarter; halt development of AUR200 and AUR300; and focus exclusively on growing sales of its marketed lupus nephritis treatment Lupkynis® (voclosporin). None of the jobs to be lost will be in commercial or commercial supporting roles. AUR200 is a specific immune modulator of BAFF (B-cell Activating Factor) and APRIL (A Proliferation-Inducing Ligand) activity. AUR300 is a peptide therapeutic that modulates M2 macrophages via the macrophage mannose receptor CD206. The company also plans to repurchase up to $150 million of its common shares, “reflecting confidence in Aurinia’s growth prospects.” Aurinia’s actions follow a strategic review in which the company received only one nonbinding expression of interest, but no formal offer, despite more than 60 entities engaging with management and financial advisor JP Morgan.
  • enGene Holdings (ENGN) shares more than doubled, zooming 117% on Wednesday, from $7.62 to $16.50, after the company announced both an oversubscribed $200 million private placement financing, and the start of a search for a successor to CEO and director Jason Hanson, who intends to resign from both positions “due to personal family and health reasons.” The board has retained an undisclosed “leading” executive search firm to assist in a comprehensive search for enGene’s next chief executive. Upon the hiring of a new CEO, Hanson has committed to supporting enGene and the new CEO as a strategic advisor. enGene’s nonviral lead program EG-70 is in a pivotal study for BCG-unresponsive nonmuscle invasive bladder cancer (NMIBC).
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