How Biogen Makes Money In 2022 And How They Defied Gravity

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Key Takeaways

Biogen has seen its stock price skyrocket after groundbreaking news about its new Alzheimer’s treatment that could improve the lives of millions of Americans, and billions worldwide.
Biogen desperately needed some good news after its previous Alzheimer’s treatment, Aduhelm, was a commercial flop.
Biogen discovers, develops, and delivers innovative therapies worldwide to people who suffer from serious neurological diseases.

You may have heard the overwhelmingly positive news for Biogen lately—this stock has been a rare winner during a time of extreme volatility in the stock market due to consistent rate hikes.

Biogen Inc. (BIBB) is one of the older global biotech companies as it was founded in 1978. Biogen has a portfolio of treatments for multiple sclerosis, spinal muscular atrophy, and other neurological diseases. Biogen is focusing on advancing its pipeline in neuroscience to transform the standard of care patients receive.

Let’s break down Biogen stock to see how the company makes money and it’s a worthwhile investment.

Biogen Earnings Report

Biogen reported revenue of $2.589 billion for the second quarter of 2022, which was down 6% year over year. The company also had earnings per share (EPS) of $7.24, up from the $2.99 figure in the same period in the previous year. The company also expects revenue of between $9.9 billion to $10.1 billion for 2022. The net income for Biogen in the second quarter was $1.06 billion. The company also cut costs and expenses by 40% to $1.32 billion.

We must point out that after the second quarter earnings report came out on July 20, the stock dipped a bit as investors were disappointed with the lack of a strategy for life after the commercial failure of its controversial Alzheimer’s drug. Biogen only recorded around $100,000 in sales for Aduhelm, mainly because Medicare wouldn’t pay for it.

One analyst referred to the quarterly report as “fine.” Many analysts also felt that the company was in a holding pattern. We’re going to dive into some major recent changes that have drastically improved the outlook for the company.

How does Biogen make money?

The company breaks down its revenue into three segments in its earnings reports:

Products. Over $2 billion came from this in the last quarter as it covers the sales of its treatments for different diseases (multiple sclerosis and spinal muscular atrophy:).
Revenue from Anti-CD20 therapeutic programs. This program brought $436.3 million, which was down from the same time last year when it brought $440 million.
Other. This revenue comes from collaborations, technological development agreements, royalty revenue on certain products, and other smaller sources.

Biogen mainly brings in most of its revenue from its treatments for multiple sclerosis, with Tecfidera being the top producer for the company.

Biogen Stock Analysis

Biogen stock has seen a significant 32% rise in the last month. In the meantime, many other stocks tumbled on the fears of a possible recession after the recent rate hikes from the Fed. Biogen stock closed on October 5, 2022 at $261.69, up 7.19% for the year.

Biogen stock shot up 39.85% on September 28 after news came out the evening before about positive results from the newest Alzheimer’s treatment. On September 27, Biogen stock closed at $197.79, and then on September 28, the stock closed at $276.61 after touching highs of $283 during the day. With the stock hanging around $261 at the moment, all of the losses from 2022 have been corrected, making Biogen a rare winner in a market that has seen plenty of volatility.

Biogen’s growth prospects

The news that broke on September 27 for Biogen’s product development could only be described as a bombshell—in a good way. The Alzheimer’s treatment, Lecanemab, is going through late-stage clinical trials that look promising for Biogen and its partner Eisai. The stock’s growth exploded when Eisai revealed that this new drug slowed down cognitive decline by 27% in early-stage Alzheimer’s patients after 18 months. These results were better than expected, resulting in a skyrocketing stock price.

What’s the big deal about Lecanemab?

This new drug slowed down the progress of Alzheimer’s disease by 27%, which surpassed the study’s threshold for effectiveness. Now there is more hope for patients suffering with this terrible disease worldwide.

Biogen got regulatory approval from the FDA for Aduhelm for treating Alzheirmer’s last year, but the rollout has been fairly slow since some exports weren’t supportive of the approval. The drug was also controversial because experts felt it hadn’t properly demonstrated its efficacy in clinical trials. It’s important to mention that Lecanemab has had better results thus far in testing.

Investors are hopeful that this new treatment will hit the market shortly. The FDA is still reviewing the data to determine if a conditional early approval will be granted. There are about 6.5 million people in the U.S. over the age of 65 who are presently living with Alzheimer’s. This new treatment could be life-changing for them and extremely profitable for Biogen.

In another surprising bit of news, Biogen announced on September 28 that they had agreed to pay $900 million to settle a lawsuit claiming that the company gave doctors kickbacks to convince them to prescribe its drugs to patients.

How’s the competitive landscape looking for Biogen?

It’s worth mentioning that Biogen isn’t alone in the fight to conquer Alzheimer’s; competitors are also working on revolutionary drugs. When the news came out about Biogen’s breakthrough treatment, competitors like Eli Lilly (LLY), Roche (RHBBY), and Prothena (PRTA) also shot up in value the next day. Shares of Eli Lilly went up almost 7%. The market considered the win for Biogen a win for all because these companies are also testing out new treatments for Alzheimer’s.

Biogen currently has a market cap of $39.975 billion. Eli Lilly has a market cap of $317.014 billion. However, we must stress that while these two larger companies are competing for the next Alzheimer’s treatment, there are many other competitors worth mentioning:

Seagen (SGEN). This biotech company focuses on developing and commercializing therapies for cancer treatment.
Amgen Inc. (AMGN). One of the largest independent biotech companies in the world.
Johnson & Johnson (JNJ). This popular company offers a variety of health products at both the consumer and medical industry levels.
Moderna (MRNA). They develop mRNA medicines for infectious and cardiovascular diseases.

What’s next for Biogen?

While the news of the positive results from the clinical trials was enough to help the stock skyrocket, it’s important to consider what’s next for Biogen stock. The company is in a strong enough financial position to be able to market the new product. With accelerated approval from the FDA, Biogen doesn’t have much room for error. We should still be cautious as we’ve seen what happened in the past with an Alzheimer’s treatment.

The next earnings report has been scheduled for October 25, 2022. As Biogen stock skyrocketed while other stocks were tumbling due to rate hikes, it will be interesting to see if this company will be as recession-proof as many other healthcare stocks have been in the past.

In the meantime, we looked toward analyst recommendations to see what they were saying about Biogen stock. (When we analyze a stock, we tend to turn to what expert analysts with a proven track record say about the company for additional perspective.) We found that 33 analysts have recommended Biogen stock as a strong buy right now.

How should you be investing?

Even though inflation and interest rates have been soaring, Biogen has performed well recently. The stock was able to eliminate all of its losses for the year in one day when the news came out on Lecanemab’s progress toward fighting Alzheimer’s disease.

With that being said, it’s worth a reminder on how risky investing in the stock market has been in 2022. It’s also crucial that you only add shares of Biogen to a well-diversified portfolio since the company is really banking on this new product to increase its revenue.

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Bottom Line

The news of this new Alzheimer’s treatment was monumental for society and for the Biogen stock. We will monitor this situation closely to see how this stock performs as concerns of a possible recession continue. If the new treatment hits the market in the near future, there’s no telling how high Biogen shares could soar.

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Source: https://www.forbes.com/sites/qai/2022/10/15/biogen-stock-how-biogen-makes-money-in-2022-and-how-they-defy-gravity/