For the time being, sales of
Biogen’s
BIIB -0.55%
would-be blockbuster Alzheimer’s disease treatment Aduhelm are stuck in the mud. Until that changes, investors shouldn’t expect the biotech giant’s share price to look much different.
Its third-quarter results were better than most expected. Sales of $2.8 billion and adjusted earnings of $4.77 a share topped analyst estimates, and Biogen raised its sales and profit outlook for 2021. Shares rose modestly Tuesday morning.
But not all beat-and-raise quarters are created equal. Aduhelm sales in the first full quarter since receiving regulatory approval reached just $0.3 million, and the company said revenue from the drug is expected to be “minimal” for the remainder of the year.
For now, Wall Street isn’t assuming that will change: the stock price is down about a third from its post-approval high and now trades below where it was on June 4, the last trading day before Aduhelm received approval amid a slew of controversy over the drug’s efficacy. A panel of outside experts had recommended the FDA withhold approval, and several panel members resigned in protest after the drug received the green light.
What is more, there are concerns about Biogen’s legacy business: sales of the company’s multiple sclerosis drugs topped analyst estimates in the quarter, but also fell 18% from a year earlier due to more competition from generic drugs.
There is reason to believe Aduhelm can begin to reach more patients, but investors will need to be patient until insurers decide whether to pay for it and doctors become more willing to prescribe it. Medicare administrators will set parameters for the government insurer to cover expenses for Aduhelm and similar drugs under development by next Spring.
A favorable ruling there would likely make the drama of this past summer a distant memory on Wall Street, since private insurers might well follow their lead. Biogen also has other Alzheimer’s treatments under development, and success in the clinic could yield a more effective option that physicians readily embrace.
Meanwhile, the bottom isn’t likely to fall out on Biogen stock: the company spent $750 million on stock buybacks in the third quarter, and has board authorization to repurchase another $2.8 billion. Total shares outstanding fell nearly 6% from a year earlier in the third quarter. An already-modest valuation helps: the stock now trades at about 14 times this year’s adjusted earnings forecast.
Still, for the stock to claw back its losses, investors need to believe Biogen still has a blockbuster Alzheimer’s drug on its hands. Unfortunately for current shareholders, even the best-case scenario will require a good bit of patience.
Write to Charley Grant at charles.grant@wsj.com
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