Biogen Earnings: Maintaining Our $340 Valuation, Shares Undervalued as Leqembi Gains Reimbursement

We’re maintaining our $340 fair value estimate for Biogen following in-line results for the second quarter, and we continue to see a mid-single-digit revenue decline and non-GAAP EPS between $15 and $16 per share this year, consistent with management’s reaffirmed guidance. Biogen saw a 15% decline in multiple sclerosis revenue in the second quarter due to generic and branded competition. Contract manufacturing revenue growth helped counter this headwind, with total revenue down just 5% in the quarter. With full U.S. Food and Drug Administration approval of Alzheimer’s disease drug Leqembi in early July, the drug now has coverage with the Centers for Medicare & Medicaid Services. This has facilitated a true launch of the drug in the U.S., and we expect approvals in Europe, Japan, and China in the coming months. That said, we think the launch will proceed somewhat slowly, as there are several hurdles that potential patients will likely need to overcome before starting treatment. We assume that Biogen will begin to record profit from its collaboration with Eisai beginning in 2025, with potential peak sales of Leqembi reaching $7 billion by 2032. Overall, we think Biogen—under the leadership of new CEO Chris Viehbacher—is making progress in developing a cost discipline and improving the quality and diversification of its neurology-rich pipeline, supporting its wide moat. We expect to see small bolt-on acquisitions move the firm further into areas like rare diseases (building on current SMA drug Spinraza) and neuropsychiatry (following the potential launch of anti-depressant zuranolone later this year), and the firm has $7.3 billion in cash to drive these deals (as well as any proceeds from the potential sale of its biosimilars business).