Biogen officially began reporting revenue from the $5.6 billion acquisition of Apellis in the second quarter, shaking up analysts’ consensus estimates and leading to a beat.
Biogen is switching to a “less intentional” M&A approach after spending $6.6 billion this year so far to buy Apellis and RayThera.
“I think we have what we need to grow near term,” CEO Chris Viehbacher said on the company’s second quarter earnings call Wednesday morning. “I think we’ll be less intentional about M&A and perhaps more opportunistic.”
With growth trending up, Viehbacher said the goal with any future dealmaking is to fill in a few gaps in the early-stage pipeline. “Ideally, we’d like to be bringing in assets between development candidate and IND [investigational new drug] stage,” he said.
With the acquisition of Apellis and its two marketed therapies, Biogen now has eight high-profile medicines on the market that are serving as current revenue drivers.
The company has been laying the groundwork to rebuild its pipeline under Viehbacher. Most prominent is the upcoming lupus portfolio, which is led by litifilimab. The CEO said that with two indications possible in cutaneous lupus erythematosus (CLE) and systemic lupus erythematosus (SLE), the drug could target an $8 billion market. So far the industry is only reaching about $2-$3 billion of that market, according to the CEO. He likened lupus to multiple sclerosis, which holds about a $20 billion opportunity.
Then in the 2030s, Biogen is looking to Alzheimer’s disease prospect diranersen—albeit cautiously given the difficult nature of the disease area—for growth.
Within each of these three pillars, Viehbacher said there is the potential for opportunistic M&A.
Confounding the analysts
Meanwhile, Biogen’s recently acquired companies are beginning to play a meaningful role in growth. The company officially began reporting revenue from Apellis in the second quarter, shaking up analysts’ consensus estimates and leading to a beat. The company reported $2.74 billion for the period, compared to the consensus estimate of $2.46 billion, according to William Blair.
“The outperformance was primarily driven by stronger-than-expected contributions from the acquired Apellis products following the earlier-than-anticipated May 14 transaction close,” Truist Securities wrote on Wednesday.
Biogen had previously been expecting full-year revenue to fall by a mid-single digit percent this year but has revised that expectation to a mid-single digit percent increase. Driving this outlook is the performance of Apellis’ Empaveli and Syfovre, which combined for $127.8 million in the second quarter.
This marks a 22% year-over-year increase for the products after the “Biogen machine” was able to get behind the marketing push, said Alisha Alaimo, president of Biogen’s North America operations.
At the same time, expectations for the year’s earnings per share (EPS) fell 15% with Apellis in the mix, with Biogen now expecting non-GAAP diluted EPS of between $12-$13, BMO Capital Markets noted. This reflects an 85-cent dilution from the transaction. Biogen had previously expected a range of $14.25-$15.25.
“Overall, we view the quarter as better than expected, but not one that materially changes the investment narrative,” Truist wrote. “The results provide incremental confidence in management’s near-term execution and highlight the strategic value of the Apellis acquisition as a bridge to future growth.”
But Biogen will have to execute on the key pipeline programs to truly win over investors, since much of the success of the second quarter relied on an acquisition, the firm added.
“We do not believe the beat meaningfully alters the key debates surrounding Biogen’s long-term earnings trajectory, particularly given that much of the upside was acquisition- and royalty-driven rather than indicative of a fundamental inflection in the underlying business. As a result, we expect investor focus to remain squarely on upcoming pipeline de-risking events,” Truist said.
Key to investors will be upcoming Phase 3 readouts for litifilimab in SLE, which is expected in the fourth quarter, and felzartamab in antibody mediated rejection of organ transplant, with data expected in the first half of 2027.
