Biogen BIIB 1.10% had reasonably solid earnings but they did nothing to change the company’s bleak outlook.
Headline results were decent: Sales of $3.1 billion fell short of analyst estimates, though adjusted earnings of $6.05 a share topped expectations. Both sales and per-share earnings grew by more than 10% from a year earlier. However, a closer look at Biogen’s quarter suggests the company will struggle to generate growth in the near future. Shares, which are down about 20% this year, sold off further Tuesday morning as a result.
Most of that sales growth came from Spinraza, a treatment for spinal muscular atrophy that launched last year. That drug hit $364 million in sales in the first quarter, up from $47 million in last year’s first quarter. But that sales total was essentially flat from the previous quarter and doesn’t appear to be on track to reach analysts’ estimate of $3.2 billion in sales in 2023.
Just 280 new patients in the U.S. began treatment in the first quarter, the second straight quarter of sharp declines. The company highlighted overseas growth for the drug, but meaningful sales growth depends on high-paying U.S. patients.
Biogen’s core business is aging. Sales in Biogen’s multiple sclerosis franchise, which accounts for two-thirds of total revenue, fell by 7% from a year ago. And the lead drug in Biogen’s pipeline, an experimental drug to treat Alzheimer’s disease, currently seems unlikely to reach the market.
Shares trade at just 10 times forward earnings, which should limit further downside. But Biogen needs to build a pipeline that excites investors to get its stock meaningfully higher. That would likely require buying new assets, which is very difficult because small biotech stocks with promising drug candidates command premium valuations. Worse, several of Biogen’s larger peers are also in the hunt for new drug candidates.
But given the stock’s torpid performance, opening the wallet is a risk that Biogen needs to take.
Write to Charley Grant at charles.grant@wsj.com