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Biogen Shares Plunge 22% on Poor MS Drug Performance, Slashed Outlook
Revised outlook attributed to lower Tecfidera demand
Biogen attributed its revised outlook to lower demand for Tecfidera, the company’s big-seller multiple-sclerosis drug. PHOTO: BIOGEN/ASSOCIATED PRESS
Shares in drug maker Biogen Inc. fell 22% on Friday, lopping about $20 billion off its market value after it disclosed a sharp slowdown in sales growth for its flagship multiple-sclerosis pill and slashed its earnings outlook.
It was the stock’s biggest one-day percentage drop since 2008, and its largest decline in absolute dollars, according to FactSet.
Biogen expects 2015 revenue growth of between 6% and 8% in 2015, roughly half the rate of the 14% to 16% growth it had forecast in January. The Cambridge, Mass., company forecast full year per-share earnings of between $14.25 and $14.70, down from its prior guidance $15.45 a share to $15.85 a share.
“We obviously have a lot of work ahead of us as we strive to maximize the success of our commercial business,” Chief Executive George Scangos said on a conference call with analysts.
The rapid decline in confidence for one of biotechnology’s most successful companies reverberated through the sector, with the Nasdaq Biotechnology index falling 4% on Friday. Along with Amgen Inc., CelgeneCorp., and Gilead Sciences Inc., Biogen is one of the “four horsemen” of biotechnology stocks that are widely owned by large investors, AllianceBernstein analyst Geoffrey Porges said in an interview.
“When one of the horsemen is down this much, it’s painful and it puts a big dent in confidence,” Mr. Porges said. “It’s just a painful reminder to investors about the vulnerability of biotech franchises.”
‘It’s just a painful reminder to investors about the vulnerability of biotech franchises.’
Biogen attributed its reduced outlook to lower demand for Tecfidera, which has become one of the most commonly used treatments for multiple sclerosis since it went on the market in 2013, and is the company’s biggest product by revenue. Fewer new patients are being prescribed the drug, Biogen said, in part because of doctors’ concerns about a rare side effect that was linked to a patient death last year. Other factors behind the slowdown include a lower reimbursement price in Germany and an increased number of patients discontinuing treatment with Tecfidera, in some cases because the pill stopped working for them, it said.
The company now expects “limited patient growth for Tecfidera in the United States,” in the remainder of 2015, finance chief Paul Clancy said on the conference call.
In the second quarter, Biogen’s revenue rose 7% to $2.59 billion, less than the $2.71 billion forecast by analysts, according to Thomson Reuters. Biogen’s profit rose to $927.3 million, or $3.93 a share, up from $714.5 million, or $3.01 a share, a year earlier. Analysts had forecast earnings per share of $4.10.
Tecfidera had $2.9 billion in global sales last year, its first full year on the U.S. market, making it one of the 10 most successful drug launches, according to Evercore ISI. The drug gained popularity because of its convenience and strong effectiveness.
In the second quarter, Tecfidera had sales of $883.3 million, up from $700.4 million last year, but less than the $941.8 million that analysts polled by FactSet had forecast.
Biogen’s stock fell $85.02 to $300.03 in 4 p.m. trading on Friday.
The drug competes in a crowded marketplace, including against other new therapies such as Novartis AG’s Gilenya, which had a sales increase of 16% to $700 million in the second quarter.
In addition to the Tecfidera slowdown, Biogen said another drug, Tysabri, failed to meet its primary objective in a mid-stage study of stroke patients, the second product-pipeline disappointment in a week for the company. Biogen on Wednesday released updated results from a closely watched Alzheimer’s disease drug study that many analysts said failed to meet investors’ expectations.
With Biogen’s revenue growth slowing and no products in its pipeline close to coming on the market, Biogen is under increased pressure from analysts to deploy its cash and take on debt to pursue acquisitions and share repurchases.
Biogen executives addressed both issues during Friday’s conference call, telling analysts they were actively looking for deal targets and likely to buy back shares opportunistically on continued weakness in the company’s stock price. Mr. Scangos, the company’s CEO, has said in the past that high equity valuations for biotech companies made him cautious about acquisitions.
In response to an analyst who noted that companies announcing acquisitions have been rewarded by investors with rising stock prices, Mr. Scangos said the company wouldn’t pursue “M&A for any short-term stock performance.”
Still, the company has been “increasingly aggressive” about seeking acquisition targets and other types of partnerships or licensing deals to add new drugs to its pipeline, Mr. Scangos said. “We will be aggressive when we see good opportunities that are consistent with our strategy, so I think you can count on that,” he added.
Biogen’s board had previously authorized a $5 billion share-repurchase program, and Mr. Clancy, the company’s finance chief, said “if the stock is under pressure as it was in premarket today, I suspect that we will look for opportunities to lower the share base.”
—Chelsey Dulaney contributed to this article.
Write to Joseph Walker at joseph.walker@wsj.com
