Typically, an earnings beat leads to market optimism. Today, though, biotech firm Biogen (NASDAQ:BIIB) is suffering the opposite fate. Despite beating second-quarter expectations for both the top and bottom lines, BIIB stock is slipping 6%. A lack of any meaningful updates regarding the company’s Alzheimer’s drug is disappointing analysts and investors.
Per the latest quarterly report, Biogen earned $5.25 per share (excluding certain items) on revenue of $2.59 billion. These figures represented year-over-year (YOY) declines of 4.5% and 7%, respectively. Further, ignoring foreign exchange rate dynamics, top-line sales slipped by 5%. However, these two key figures still beat consensus estimates, which anticipated adjusted earnings per share (EPS) of $4.08 and revenue of $2.48 billion.
Still, one concern about the report is the lack of any strategic guidance regarding Biogen’s treatment for Alzheimer’s, Aduhelm. This drug has generated considerable controversy for its alleged danger and denial of routine Medicare coverage. With a listed price of $28,200 per year, Biogen has effectively abandoned commercialization efforts for the treatment. Now, by not discussing how the company moves forward, many investors are feeling left in the dark.
On top of this, CEO Michel Vounatsos will be stepping down from his role once Biogen’s board finds a suitable replacement. That news only adds more complexity to BIIB stock.
BIIB Stock: Analysts Weigh In on Biogen
Mizuho Securities analyst Salim Syed calls the Q2 earnings results “fine.” In particular, Syed noted that sales of Biogen’s biggest product, multiple sclerosis treatment Tecfidera, plunged over 18% to $398 million. Although that sales tally beat consensus calls for $344 million, Tecfidera is facing pressure from generic rivals.
Meanwhile, Wedbush analyst Laura Chico is worried about Biogen’s declining business. Chico rates BIIB stock as “neutral” and gives it a $188 price target. The analyst says in a research note:
“We continue to see Biogen in a holding pattern and while the commercial results are better than anticipated, this remains a declining business.”
Finally, RBC Capital Markets analyst Brian Abrahams is surprised that, despite clear challenges, Biogen raised its guidance for the year. Per Investor’s Business Daily, “Biogen expects $9.9 billion to $10.1 billion in sales and $15.25 to $16.75 per share in adjusted earnings.” Previously, the company had “targeted adjusted income of $15.13 a share on sales of $9.85 billion” while “analysts had projected adjusted income of $15.47 per share and $9.84 billion in sales.”
Trimming the Pipeline
Interestingly, management says that Biogen is on track to disclose its final-phase clinical testing results for lecanemab, another Alzheimer’s drug. But amid this news, the biotech firm also scrapped a schizophrenia drug that didn’t meet goals. Additionally, the company’s pipeline no longer includes two “experimental treatments for multiple sclerosis and Alzheimer’s disease.”
Abrahams believes these setbacks should help keep expectations in-check for future investors. However, the analyst also points out the high-risk, high-reward nature of Biogen’s pipeline. Given that biotech companies live or die by the treatments they forward, Biogen’s clinical disappointments — along with other business-related challenges — could pose big headwinds for BIIB stock.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
