LEQEMBI, SKYCLARYS And ZURZUVAE Will Spark Future Opportunities

Key Takeaways

• Expanding Alzheimer's treatments, including LEQEMBI, and SKYCLARYS' success in major markets could significantly drive short-term revenue growth.
  
• Strategic focus on rare disease treatments, a robust late-stage pipeline, and external collaborations bolster long-term revenue growth and market expansion.
  
• Biogen's revenue decline due to a shrinking MS portfolio, competition from biosimilars and generics, and dependency on risky new product pipelines presents substantial financial challenges.

Catalysts

Biogen Inc. discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases in the United States, Europe, Germany, Asia, and internationally.

• The approval and rollout of LEQEMBI in Europe, along with potential approvals for subcutaneous formulations and the development of blood-based biomarker tests, are expected to aid in expanding the market, enhancing revenue growth, and improving access for Alzheimer's patients.
  
• The success of SKYCLARYS in the global market, with a 59% year-over-year increase, and the approval of this medication in large markets like Brazil are likely to drive future revenue growth as patient access expands and adoption increases.
  
• The continued growth of the rare disease drug ZURZUVAE, with a strategic shift to focus on first-line postpartum depression treatment with OB/GYNs, is expected to boost revenue due to increased prescriptions and physician engagement.
  
• The expansion of Biogen's late-stage pipeline with five Phase III studies and potential key data readouts starting in 2026 is seen as a catalyst for long-term revenue and earnings growth by increasing the number of products approaching commercialization.
  
• The strengthening of the company's balance sheet, maintaining a strong cash position, and strategic external collaborations—such as the one with Stoke Therapeutics for Zorevunersen—are expected to enhance long-term earnings potential through pipeline development and new market opportunities.

Biogen Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Biogen's revenue will decrease by 2.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 15.1% today to 22.9% in 3 years time.
• Analysts expect earnings to reach $2.1 billion (and earnings per share of $15.06) by about May 2028, up from $1.5 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $3.1 billion in earnings, and the most bearish expecting $1.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.9x on those 2028 earnings, up from 11.6x today. This future PE is lower than the current PE for the US Biotechs industry at 18.3x.
• Analysts expect the number of shares outstanding to grow by 0.64% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.71%, as per the Simply Wall St company report.

Biogen Future Earnings Per Share Growth

Risks

• The declining MS (Multiple Sclerosis) portfolio remains a risk as it has been gradually declining, impacting Biogen's revenue as new product growth may not offset the losses in the MS segment.
  
• There is the potential impact of the biosimilar entry for TYSABRI in the U.S., and the presence of generics for TECFIDERA in Europe, which could further reduce revenues in the established MS segment.
  
• While the new product portfolio is rising, the current revenue from these is insufficient to offset the decline in legacy products, which is affecting overall revenue growth negatively.
  
• Biogen's heavy reliance on successful clinical trial outcomes and regulatory approvals for pipeline products introduces significant risk to future earnings, particularly in high-risk areas like neuroscience.
  
• There is uncertainty and potential financial risk associated with tariffs, as geopolitical changes may alter the current tariff exemptions, affecting Biogen's supply chain costs and net margins.

Valuation

• The analysts have a consensus price target of $173.515 for Biogen based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $260.0, and the most bearish reporting a price target of just $115.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.2 billion, earnings will come to $2.1 billion, and it would be trading on a PE ratio of 14.9x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of $116.82, the analyst price target of $173.52 is 32.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.