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Biogen Should Resume Strong Growth With Zuranolone Approval

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Biogen (NASDAQ:BIIB) has been a roller-coaster thrust for investors for respective years now. Back successful 2015 it ran up to complete $440 per share. It dropped arsenic debased arsenic $205 successful 2016 but sewage supra aliases adjacent $350 successful 2018 and 2021. Despite immoderate adjacent ramps of newer drugs, peculiarly Ocrevus and Spinraza, gross has declined arsenic older narcotics person deed patent expirations aliases caller competition. I judge that pinch 2 narcotics pinch precocious imaginable income owed for FDA decisions successful July and August, Biogen could again beryllium connected nan verge of large gains. But burned successful nan past, investors are not yet pricing these imaginable early revenues, astatine slightest not fully, into nan existent banal price. While location is nary guarantee that nan FDA (or different nationalist regulators) will o.k. either drug, I judge some approvals are likely. For those who tin guidelines nan risk, Biogen looks for illustration an charismatic prime some for nan short (6 month) and agelong terms. Before digging into nan 2 imaginable supplier approvals, I will look astatine Q4 2022 results, which exemplify why Biogen is not presently priced arsenic a maturation stock.

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Q4 2022 Results

Biogen Q4 2022 results were reported connected February 15, 2023. Revenue of $2.54 cardinal was down 7% from Q4 2021. GAAP nett income was $0.55 billion, up 49% y/y. GAAP EPS was $3.79, up 52% y/y. Non-GAAP numbers were besides up y/y: nett income was $587 million, up 17% y/y, while EPS was $4.05, up 19% y/y. Despite nan affirmative profit numbers, rate travel from operations was negative, for a nonaccomplishment of $195 million. Biogen remains profitable, but nan rising y/y profitability is will slice if gross continues to decline.

Biogen is 1 of nan oldest of nan biotechnology pharmaceutical companies, and for respective years has been showing its age. Early successful therapies, chiefly for aggregate sclerosis, person some been seeing patents expire and accrued title from newer drugs. For years Biogen guidance has known it needs to renew its supplier portfolio, but that has not worked retired very well, truthful far. The specifications are successful nan pursuing chart:

Therapy Revenue successful Millions

Q4 2022

Q3 2022

Q4 2021

y/y %

Tecfidera

$297

$339

$487

-39%

Vumerity

151

138

125

21%

Avonex + Plegridy

310

336

378

-18%

Tysabri

488

506

513

-5%

Fampyra

23

22

26

-12%

Spinraza

459

431

441

4%

Benepali

100

110

134

-25%

Imraldi

52

58

63

-17%

Flixabi

19

19

24

-21%

Byooviz

3

1

na

Fumaderm

2

2

3

%

Aduhelm

2

1

na

Rituxan+Gazyva royalty

137

136

153

-10%

Ocrevus royalty

311

281

261

19%

Other

192

130

126

52%

Biogen Q4 therapy revenues, compiled from property releases by nan author

With nan objection of Spinraza and Ocrevus, Biogen's biggest money makers, Tecfidera, Avonex/Plegridy, and Tysabri are successful evident decline. Spinraza is licensed from Ionis (IONS). Ocrevus does not supply arsenic overmuch gross arsenic nan MS narcotics it drives from nan market, since Biogen only gets royalties from its commercialized partner Genentech/Roche. Even nan precocious introduced biosimilars Benepali, Imraldi, and Flixabi are seeing declining gross arsenic aggregate different biosimilars compete successful nan market, taking stock and driving prices down.

So overmuch for nan punishment and gloom. Now connected to nan dream for a gross ramp successful 2024. Presuming 2 caller narcotics pinch precocious gross imaginable get FDA and payer approvals.

Zuranolone Potential for Depression

Zuranolone is waiting for an FDA determination arsenic a therapy for MDD (Major Depressive Disorder) and PPD (Post-Partum Depression). The FDA filing for zuranolone has a PDUFA (deadline for decision) day of August 5, 2023. This is pinch partner Sage Therapeutics (SAGE) [see also Sage Therapeutics Looking to FDA Approval of Zuranolone]. Biogen has a important ownership liking successful Sage.

If approved, this is apt a very large market. 14 cardinal Americans person been diagnosed pinch MDD and location are astir a half-million PPD cases annually. How ample nan last marketplace will beryllium depending connected precisely what explanation Zuranolone gets and really it competes pinch narcotics that are presently connected nan market, including comparatively inexpensive generic versions of Prozac. That successful move will dangle connected really some nan FDA and doctors deliberation astir nan information generated during zuranolone's objective trials. There were 5 awesome MDD studies and 2 PPD studies. There has been nan accustomed statement successful nan expert organization astir really bully nan results of those studies are.

The results of nan objective tests tin beryllium seen successful nan zuranolone presentation, slides 13 to 18. The main constituent of disapproval is that 1 of nan 7 objective tests grounded to nutrient affirmative results. That seems, to me, to beryllium outweighed by nan preponderance of information showing important diligent betterment aft a 14-day treatment. Zuranolone appears to enactment overmuch much quickly than narcotics presently connected nan market, pinch patients achieving important betterment arsenic early arsenic time 3 of dosing. It has a beardown information floor plan and tin moreover beryllium added to different therapies. It besides seems to show denotation improvements continuing aft nan 14-day people of curen is stopped. Keep successful mind these are statistical results. MDD has a assortment of causes, including chiefly psychological ones, truthful not each diligent will use from immoderate peculiar therapy.

Given each that, I deliberation it is highly apt nan FDA will o.k. zuranolone. Of course, location is consequence that will not happen. Another information is that Biogen will not beryllium capable to commencement trading zuranolone instantly moreover if nan FDA determination is positive. This people of narcotics must besides beryllium reviewed by nan DEA and assigned its people schedule. That reappraisal process should beryllium 3 months long. So, first income mightiness beryllium successful November 2023. Ramping up caller narcotics tin beryllium a agelong process; 1 we tin watch for is zuranolone successful 2024.

Leqembi Potential for Alzheimer's

Most investors are now acquainted pinch nan Aduhelm saga and its effect connected Biogen's banal price. Likely because investors felt burned by that experience, nan guidance to affirmative news for nan Alzheimer's therapy Leqembi has been comparatively muted. The FDA granted accelerated support to Leqembi connected January 6, 2023. However, Medicare (Centers for Medicare and Medicaid Services), successful ruling it would not salary for Aduhelm treatments contempt nan FDA support of nan supplier and nary different therapy being disposable to slow diminution owed to nan disease, had antecedently ruled that accelerated approvals of anti-amyloid narcotics would not value for reimbursements. Fortunately, partner Eisai and Biogen had already generated information from a larger Phase 3 trial. On nan aforesaid day, January 6, Eisai made a submission for afloat support based connected information from nan Phase 3 study. In that Clarity study Leqembi met nan superior and each cardinal secondary endpoints pinch statistically important results. The astir troubling broadside effect, ARIA (amyloid-related imaging abnormalities), was besides wrong expectations.

On March 5, 2023 nan companies announced that nan FDA had accepted nan caller Leqembi filling for afloat approval. The PDUFA day is July 6, 2023. There will beryllium an Advisory Committee earlier that, which should springiness america much insight. Given nan accelerated support and beardown Phase 3 data, I deliberation that afloat support is much apt than not. The much absorbing finance mobility is whether insurers, chiefly Medicare, will work together to salary for nan drug. Their existent erstwhile objection was based connected cost, truthful we mightiness spot a repeat. Billions for crab narcotics that often don't work, not 1 cent for an Alzheimer's drug, moreover if it does activity for immoderate patients. I americium optimistic fixed nan information and nan little value (compared to Aduhelm) of $26,500 per year. I understand those who judge nan consequence is excessively precocious to tolerate until much is known.

Rest of Pipeline

The Biogen pipeline is extensive. It is much divers than it was a decade ago, branching retired from aggregate sclerosis to different neurological diseases and uncommon diseases. The pipeline, speech from zuranolone and Leqembi, is not apt to person immoderate important effect connected gross aliases profits successful 2023 aliases 2024. There is simply a imaginable therapy, tofersen, earlier nan FDA. The tofersen Advisory Committee gathering is scheduled for March 22, 2023, followed by a PDUFA day of April 25, 2023. There are immoderate known questions astir tofersen that could derail its approval. If approved, it would beryllium for nan ultra-rare shape of AML (amyotrophic lateral sclerosis) caused by mutations successful nan SOD1 gene. Tofersen is an RNAi medicine licensed from Ionis. I spot it arsenic a proof-of-concept medicine, pinch nan subject perchance starring to viable therapies for much communal forms of AML and different neurodegenerative diseases. It would not beryllium a large gross generator moreover if approved by nan FDA and world regulatory agencies.

Analysis

Biogen's gross will proceed to diminution if nan FDA (or payers) declines to o.k. some zuranolone and Leqembi. It is still profitable, but profits will request to proceed to beryllium plowed backmost into investigation and development, and acquisitions aliases licensing of imaginable therapies, successful bid to create nan imaginable for much early revenue.

If either zuranolone aliases leqembi is approved by nan FDA, different nationalist regulators, and by insurers, past I expect genuinely important income. The only questions would beryllium nan gait of nan ramp and nan eventual tally rate. The ramp will apt beryllium peculiarly slow for Leqembi, fixed nan diagnostics that request to beryllium done earlier a medicine is written. My conjecture is that some will beryllium approved, but nan caveats are much galore for Leqembi.

I deliberation nan marketplace is mostly discounting some imaginable approvals. Currently Biogen's PE (price to net ratio, forward) is 17.43, which is simply a spot precocious for a institution pinch declining revenue, but very debased if we fig connected either a zuranolone aliases an Leqembi approval, overmuch little both. The banal value did jump from nan astir $200 to $225 level past summertime to a wider scope of astir $250 to $300 level since September 29. Despite not counting successful nan approvals astatine nan existent banal level, nonaccomplishment to get nan first support would apt nonstop nan banal plummeting. Getting nan first support is apt to nonstop nan banal person to its five-year precocious of conscionable complete $400, fixed investor psychology. The banal price, if Biogen receives some approvals, will beryllium based, astatine first, connected investor enthusiasm. There will still beryllium nan interest of reimbursement, peculiarly for Leqembi. If Leqembi gets reimbursement support analysts will beryllium looking astatine projected income for, say, 2025, and nan banal value will apt go based mostly connected that.

This article was written by

William Meyers floor plan picture

I provided banal and enslaved investigation and study to a mini headdress master investor, Lloyd Miller, from 2002 until his decease successful January 2018. For my ain relationship I put chiefly successful exertion and biotechnology stocks. My exertion and finance web tract is openicon.com, wherever readers tin position nan notes I return to make decisions and to constitute articles for Seeking Alpha.

Disclosure: I/we person a beneficial agelong position successful nan shares of IONS, BIIB either done banal ownership, options, aliases different derivatives. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga



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