Executive Summary / Key Takeaways

• Biogen is executing a strategic transformation, successfully launching four new therapies (LEQEMBI, SKYCLARYS, ZURZUVAE, QALSODY) that are collectively growing and beginning to offset the revenue decline from the legacy multiple sclerosis (MS) franchise.
• The company's pipeline is maturing, with five Phase 3 studies initiating in 2025 across neurology, rare disease, and immunology, aiming to diversify risk and provide future growth drivers beyond the current launch portfolio.
• Disciplined cost control through the "Fit for Growth" program is improving operating margins and freeing up capital for strategic investments, including external business development focused on high-conviction assets in immunology and rare diseases.
• LEQEMBI's launch is progressing sequentially, supported by regulatory approvals (including EU authorization and US IV maintenance), upcoming subcutaneous formulations, and potential blood-based diagnostics to address infrastructure bottlenecks and expand the treatable population.
• While competitive pressures in MS and potential impacts from the IRA's Medicare Part D redesign ($50M-$100M unfavorable impact expected in 2025) present near-term headwinds, the company's strong balance sheet and focus on differentiated therapies position it for potential sustainable growth in the coming years.

Biogen's Strategic Pivot: Building Growth Beyond a Legacy Franchise

For years, Biogen Inc. (NASDAQ: BIIB) was synonymous with multiple sclerosis, building a formidable franchise that drove significant revenue and defined its identity. However, as key products like TECFIDERA and TYSABRI faced increasing generic and biosimilar competition, the company entered a period of revenue and profit contraction. Recognizing the need for a fundamental shift, Biogen embarked on a strategic transformation aimed at diversifying its portfolio, optimizing its cost structure, and rebuilding a pipeline capable of delivering sustainable growth. This pivot is now visibly taking shape, with new product launches gaining traction and a maturing pipeline offering the potential for future value creation, even as the legacy MS business continues its expected decline.

The core of Biogen's revitalized strategy centers on leveraging its deep expertise in neuroscience while expanding into adjacent areas like specialized immunology and rare diseases. This is not merely a diversification play but a calculated move to enter markets with high unmet needs and where Biogen believes its scientific capabilities and commercial infrastructure provide a competitive advantage. The company's history of pioneering breakthrough therapies, including the first approved treatment for SMA (SPINRAZA) and the first to address a defining pathology of Alzheimer's disease (LEQEMBI), underpinning this strategic direction.

In the competitive landscape, Biogen faces formidable rivals like Eli Lilly (LLY) in Alzheimer's, Roche (RHHBY) in MS and immunology, Novartis (NVS) in MS and rare diseases, and AbbVie (ABBV) in immunology and biosimilars. These large players possess significant financial resources, broad pipelines, and established global footprints. Biogen's strategy is not to compete head-to-head across all therapeutic areas but to identify niche opportunities where its differentiated technology and specialized commercial model can create a competitive moat. For instance, while LLY's donanemab offers an alternative in Alzheimer's, Biogen's LEQEMBI, with its dual mechanism targeting both plaques and protofibrils and extensive clinical data across a broad patient population, seeks to differentiate on long-term benefit and a potentially more manageable safety profile. In rare diseases, Biogen's "needle in a haystack" patient identification capabilities, honed with SPINRAZA and now applied to SKYCLARYS, provide an operational edge against broader competitors.

Technological Edge: Driving Differentiation in Complex Diseases

Biogen's investment thesis is significantly underpinned by its technological differentiation, particularly in complex neurological and immunological disorders. In Alzheimer's disease, beyond the approved LEQEMBI, the company is advancing a tau-targeting antisense oligonucleotide (ASO), BIIB080. While specific quantitative performance metrics for BIIB080 are not yet available from Phase 2 data, targeting tau represents a distinct approach from amyloid-beta clearance, aiming to address a pathology strongly correlated with disease severity. The strategic intent is to build a multi-modal Alzheimer's portfolio, recognizing the complex nature of the disease. Biogen is also exploring novel delivery technologies, such as brain shuttle approaches, to enhance the efficacy and safety of future neuroscience therapies.

In immunology, the acquisition of HI-Bio brought felzartamab, an anti-CD38 antibody. This technology is designed to selectively deplete plasma cells responsible for producing pathogenic antibodies while sparing broader B-cell lineages. Phase 2 data for felzartamab have shown compelling results: in Antibody-Mediated Rejection (AMR), over 80% resolution was observed at week 24; in IgA Nephropathy (IgAN), durable reductions in IgA and proteinuria were seen up to 24 months after the last dose; and in Primary Membranous Nephropathy (PMN), rapid, deep, and durable reductions in anti-PLA2R antibodies and proteinuria were demonstrated. These results suggest a potentially differentiated profile based on efficacy, durability, and safety compared to other B-cell targeting therapies, providing a strong scientific rationale for the planned Phase 3 studies.

Furthermore, Biogen's pipeline includes litifilimab, a BDCA2-targeting antibody for lupus. While specific quantitative advantages over existing lupus therapies are still being established in late-stage trials, targeting BDCA2 represents an innovative approach to modulating the type I interferon pathway, a key driver in lupus pathogenesis. The company's collaboration with Stoke Therapeutics (STOK) for zorevunersen, an ASO targeting the SCN1A gene for Dravet syndrome, also highlights a technological focus on addressing the genetic root cause of a rare epilepsy, with Phase 1/2a data showing significant seizure reduction (87%) and improvements in cognitive/behavioral measures (Vineland-3 scores).

The "so what" for investors is that these technological advancements and differentiated mechanisms of action are intended to create competitive moats, potentially leading to best-in-class profiles, higher pricing power, and sustained market share in areas of high unmet need. While R&D is inherently risky, the focus on assets with compelling early clinical data and clear biological rationale aims to improve the probability of success and translate scientific innovation into tangible financial returns.

Performance in Transition: New Launches Gain Momentum

Biogen's recent financial performance reflects the dynamics of its ongoing transformation. In the first quarter of 2025, total revenue increased by 6.1% year-over-year to $2.43 billion. This growth was notably supported by the emerging portfolio, with revenue from the four recent launch products reaching $200 million in Q1 2025, representing a significant increase both sequentially (up 22% from Q4 2024) and year-over-year (more than doubling from Q1 2024).

The Rare Disease segment was a key contributor to this growth, with revenue increasing by 32.9% year-over-year to $563.3 million in Q1 2025. This was primarily driven by strong performance from SPINRAZA in rest-of-world markets (benefiting from a one-time VAT refund and shipment timing) and the continued ramp-up of SKYCLARYS ($123.9 million in Q1 2025) and QALSODY ($15.5 million in Q1 2025). SKYCLARYS is seeing increasing demand globally, particularly with its launch in Europe and other international markets, although U.S. revenue in Q1 2025 was impacted by Medicare discount dynamics.

The Alzheimer's Collaboration revenue, primarily from LEQEMBI, also showed significant growth, reaching $33.0 million in Q1 2025, up substantially from $2.8 million in the prior year period. Global end-market sales reported by Eisai (ESALY) were approximately $96 million in Q1 2025, demonstrating sequential growth. While the U.S. launch has faced infrastructure challenges, the recent EU marketing authorization and upcoming subcutaneous formulations are expected to help address these bottlenecks.

Conversely, the legacy MS franchise continued its expected decline, with revenue decreasing by 11.4% year-over-year to $953.0 million in Q1 2025. This erosion is primarily due to intense competition from generics for TECFIDERA and biosimilars for TYSABRI, particularly in Europe and the U.S. The Anti-CD20 therapeutic programs revenue also saw a modest decline of 4.0% to $378.2 million, mainly due to lower OCREVUS royalties (impacted by a prior period estimate adjustment) and decreased U.S. RITUXAN profit share (due to biosimilar competition), partially offset by growth in GAZYVA sales volumes. Biosimilars revenue also decreased by 8.2% to $180.8 million, impacted by competitive pricing pressures and supply constraints for certain products.

Operationally, Biogen is focused on efficiency through its Fit for Growth program, targeting $1 billion in gross operating expense savings by the end of 2025. This initiative is contributing to improved operating margins and allowing the company to absorb increased investments in its launch products and pipeline. In Q1 2025, R&D expense decreased slightly, reflecting cost reduction measures offset by increased clinical trial spend on key assets like litifilimab and felzartamab, with some R&D costs offset by the Royalty Pharma funding. SG&A expense also decreased, benefiting from cost-reduction measures despite increased launch-related spending.

Financially, Biogen maintains a solid balance sheet. As of March 31, 2025, cash and cash equivalents stood at $2.60 billion, up from $2.38 billion at the end of 2024. Net cash flow from operations in Q1 2025 was $259.3 million, impacted by the upfront payment for the Stoke collaboration and higher employee benefit payments, but supported by lower inventory levels and the Royalty Pharma funding. The company's debt levels remain manageable, with a long-term debt balance of $4.50 billion and access to a $1.5 billion revolving credit facility. This financial strength provides the flexibility to fund ongoing operations, service debt, and pursue external growth opportunities.

Outlook and Future Catalysts

Biogen's outlook for 2025 reflects the continued dynamics of its transformation. The company expects total revenue to decline by a mid-single-digit percentage, driven by the ongoing erosion of the MS franchise, which is anticipated to outpace the growth from the new launches in absolute dollar terms. A key near-term headwind is the potential U.S. launch of a TYSABRI biosimilar in the fourth quarter of 2025 and further impacts from TECFIDERA generics in Europe. Additionally, the IRA's Medicare Part D redesign is expected to have a modest net unfavorable revenue impact of $50 million to $100 million in 2025, primarily affecting SKYCLARYS and the MS portfolio.

Despite these top-line pressures, the company's focus on cost control is expected to support profitability. The Fit for Growth program is on track to deliver its targeted savings by the end of the year, contributing to operational efficiency. Combined non-GAAP R&D and SG&A expense is projected to be approximately $3.9 billion for the full year 2025. The company's non-GAAP diluted EPS guidance for 2025 is set at $14.50 to $15.50, reflecting the financial impact of recent transactions and foreign exchange dynamics.

Looking beyond 2025, the investment thesis hinges on the successful execution of the pipeline and the continued ramp-up of the launch products. Key catalysts include:

• LEQEMBI: Potential U.S. approval of the subcutaneous maintenance formulation (PDUFA August 2025) and the subcutaneous initiation formulation (expected H1 2026), which could significantly improve administration convenience and expand access by reducing reliance on infusion centers. Increased utilization of blood-based diagnostics could also streamline the diagnostic pathway.
• Pipeline Maturation: Initiation of five Phase 3 studies in 2025 (including three for felzartamab in AMR, IgAN, and PMN, and the EMPEROR study for zorevunersen), with initial data readouts expected in 2026. These programs represent significant potential revenue drivers if successful.
• High-Dose SPINRAZA: Potential FDA decision on the higher-dose regimen (expected September 2025), which could offer improved efficacy and a more convenient dosing schedule, potentially bolstering SPINRAZA's competitive position.
• Immunology Portfolio: Progress in the lupus pipeline (dapirolizumab, litifilimab), with dapirolizumab entering a second Phase 3 study in 2025 following positive results from the first.

Biogen's strategic focus on disciplined business development is expected to continue, leveraging its strong balance sheet and cash flow generation to augment the pipeline with high-conviction assets. The recent Stoke collaboration and Royalty Pharma funding arrangement exemplify this approach, spreading investment risk and adding promising rare disease and immunology assets.

Risks and Challenges

While Biogen's transformation shows promise, several risks could impact the investment thesis:

• Commercial Execution: The success of the new launches, particularly LEQEMBI, depends heavily on overcoming infrastructure challenges, expanding the prescriber base, and securing favorable reimbursement globally. Competition from alternative therapies, including Lilly's donanemab, could impact market share capture.
• Pipeline Risk: Despite efforts to improve the risk profile, late-stage clinical trials can fail. Negative readouts from key Phase 3 programs (felzartamab, litifilimab, dapirolizumab, zorevunersen, BIIB080) would significantly impact future growth prospects.
• Competitive Pressures: Continued and potentially accelerated erosion of the MS franchise from generics and biosimilars could create a larger headwind than currently anticipated. Competition in the rare disease and immunology spaces is also intense.
• Pricing and Reimbursement: Increasing global pressure on drug pricing, including the implementation of the IRA's provisions, could negatively impact revenue and profitability, particularly for high-cost therapies.
• Manufacturing and Supply Chain: Reliance on third-party manufacturers and single-source suppliers, along with geopolitical tensions and global supply chain disruptions, could lead to manufacturing issues, supply constraints, and increased costs.
• Regulatory Risk: Delays or negative outcomes in regulatory reviews (e.g., re-examination for LEQEMBI in Europe, approvals for new formulations or pipeline assets) could impact launch timelines and market access.
• Integration Risk: Successful integration of acquired assets and businesses (Reata, HI-Bio) is crucial to realizing the anticipated benefits and synergies.

Conclusion

Biogen is actively reshaping its future, moving beyond its historical reliance on the MS franchise to build a more diversified and sustainable business. The successful launch of four new, first-in-class therapies is providing crucial growth momentum, helping to offset the expected decline in legacy products. Supported by a disciplined cost structure and a strong balance sheet, the company is strategically investing in a maturing pipeline of high-conviction assets across neurology, rare disease, and immunology, aiming to deliver future waves of innovation and growth. While significant competitive pressures, pricing challenges, and inherent R&D risks remain, Biogen's focus on differentiated technologies, operational efficiency, and targeted business development suggests a credible path towards restoring sustainable growth and creating long-term shareholder value. The performance of the launch portfolio and the successful execution of the late-stage pipeline will be critical indicators to watch in the coming quarters.