Biogen Inc Wants to Be the "Fastest-Growing Large-Cap Biotech Company"

Biogen (NASDAQ: BIIB) started the biotech earnings season off with a bang, generating enough revenue for the company to have confidence to increase its revenue guidance for the year. Earnings weren't nearly as hot, but Biogen has a good excuse: one-time investments in the company's future that lowered the bottom-line results. Beyond the profit-loss statement, Biogen laid out plans for diversifying away from its multiple sclerosis (MS) franchise as it looks to accelerate growth.

Biogen results: The raw numbers


Q2 2017

Q2 2016

Year-Over-Year Change


$3.078 billion

$2.894 billion


Income from operations

$1.2 billion

$1.46 billion


Earnings per share




What happened with Biogen this quarter?

  • While 6% revenue growth doesn't sound too exciting, the spinout of Bioverativ (NASDAQ: BIVV) had a negative effect on the revenue line. Excluding those hemophilia sales, revenue was up a solid 15% year over year.
  • Sales of Biogen's MS drugs were up only 5% year over year, but considering the competitive environment, that's not a bad showing. Tecfidera sales increased 13%, while interferons -- Avonex and Plegridy -- combined for a 5% year-over-year decline, and Tysabri sales were flat year over year.
  • A good portion of the increased revenue came from Spinraza, the spinal muscular-atrophy (SMA) drug developed with Ionis Pharmaceuticals (NASDAQ: IONS). In just the second full quarter on the market, the drug generated $203 million in sales, putting it well on its way to blockbuster status, even considering that $30 million of the sales were due to a build in inventory.
  • Sales of biosimilar drugs grew 37% year over year, but they remain a small revenue source, bringing in just $91 million in the second quarter.
  • The lower income from operations and earnings was due to research-and-development expenses that included $360 million related to the licensing deal with Bristol-Myers Squibb (NYSE: BMY) for its anti-tau Alzheimer's disease drug candidate, now called BIIB092, and a $120 million charge related to the acquisition of a phase-3-ready stroke treatment, BIIB093, from Remedy Pharmaceuticals.

What management had to say

"Overall, we believe Spinraza will become one of our largest commercial assets shifting the center of gravity for Biogen beyond MS to generate new growth," said Michel Vounatsos, Biogen's CEO. Vounatsos thinks Biogen can generate plenty of cash over the next few years and laid out plans for how to use it:

Later in the call, Vounatsos noted that, while external growth is important, the deals still have to make financial sense, and he's not completely ruling out share buybacks:

Looking forward

Management raised its 2017 revenue guidance to a range of $11.5 billion to $11.8 billion, citing the solid Spinraza launch as the main reason for the increase. Investors should keep in mind, though, that we're probably at the steepest part of the launch sales curve because sales growth will likely slow in coming quarters since patients get more frequent treatments when they start therapy compared to the maintenance phase. Also, many of the older SMA patients have had spinal surgeries, which makes injecting Spinraza into the spinal canal challenging.

Management also laid out longer-term plans to save up to $400 million annually by 2019. Rather than the savings flowing to earnings, Biogen plans to spend the savings on additional research and development through internal development, as well as the aforementioned move toward acquiring and licensing products. Investors should expect more lumpy quarters on the earnings line like we saw this quarter.

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Brian Orelli has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Biogen and Ionis Pharmaceuticals. The Motley Fool recommends Bioverativ. The Motley Fool has a disclosure policy.