Biogen's Q2 Beat Masks Long-Term Erosion in Core MS Portfolio: Is the Bull Case Sustainable?

Biogen's Q2 2025 earnings report was a resounding short-term win, with a 37% earnings-per-share (EPS) beat and a 12% revenue surprise. Investors celebrated the company's ability to leverage its Alzheimer's drug LEQEMBI and rare disease treatment SKYCLARYS, which generated $252 million in revenue—a 91% year-over-year increase. The stock's 5% pre-market rally and revised full-year EPS guidance to $15.50–$16.00 signaled optimism. Yet beneath the surface, the company's core multiple sclerosis (MS) franchise—a $9.7 billion revenue driver in 2019—continues to erode. By 2024, MS revenue had fallen to $1.1 billion, a 14.8% decline from peak levels. This divergence between short-term outperformance and long-term structural challenges raises a critical question: Can Biogen's new products and cost discipline fully offset the collapse of its MS business?

The Q2 Illusion: Strong Numbers, Weaker Fundamentals

Biogen's Q2 results were buoyed by two key factors: new product momentum and cost discipline. LEQEMBI, co-marketed with Eisai, achieved $160 million in global sales, including a $35 million one-time shipment to China. SKYCLARYS, its Friedreich's ataxia drug, grew 13% sequentially to $130 million. Meanwhile, R&D expenses dropped 21% year-over-year, driven by the “Fit for Growth” initiative, which aims to generate $800 million in net savings by year-end. These metrics suggest a disciplined, innovation-driven company.

However, the MS portfolio—a once-dominant revenue engine—told a darker story. Tecfidera and Tysabri, two of Biogen's flagship MS drugs, saw sales drop 8% in the fourth quarter of 2024. Ex-U.S. markets are particularly vulnerable, with generic and biosimilar competition accelerating. For example, Tyruko, a natalizumab biosimilar, was approved in the U.S. in August 2023, threatening Tysabri's pricing power. Even in the U.S., where MS revenue held up better due to VUMERITY's demand, the decline is inevitable: Biogen now forecasts a mid-single-digit drop in MS revenue for 2025.

The MS Decline: A Structural Headwind, Not a Cyclical Wobble

The erosion of Biogen's MS business is not a temporary setback but a structural collapse. From 2019 to 2024, MS revenue fell from $3.67 billion to $1.1 billion—a 67% decline. This is driven by three forces:
1. Genericization: Tecfidera and Tysabri face increasing competition from biosimilars and generics, eroding margins and market share.
2. Anti-CD20 therapies: Rivals like Roche's Ocrevus and Novartis's Kynamro are capturing patients with more effective treatments for relapsing MS.
3. Market saturation: The U.S. MS market is nearing peak penetration, with Biogen's older drugs (e.g., Avonex) losing relevance.

While VUMERITY and SPINRAZA have provided some respite, they cannot reverse the trend. Biogen's MS portfolio is now a cash flow generator, not a growth engine. This shift is critical: a company cannot sustain long-term success if its core business is in terminal decline.

Can New Products and Cost Cuts Fill the Void?

Biogen's bull case hinges on two pillars: pipeline innovation and operational efficiency.

1. Pipeline Innovation
LEQEMBI and SKYCLARYS are undeniably strong. LEQEMBI's clinical data—showing sustained cognitive benefits after four years—reinforces its value proposition in Alzheimer's, a $100 billion market. SKYCLARYS's expansion into pediatric Friedreich's ataxia (a Phase 3 trial launched in Q2 2025) could unlock new revenue streams. However, these drugs are still early in their lifecycle. LEQEMBI's U.S. sales of $63 million in Q2 2025 are impressive but pale in comparison to Tecfidera's peak $4 billion annual sales.

2. Cost Discipline
Biogen's cost-cutting efforts are commendable. R&D expenses are down 21% year-over-year, and the company plans $1 billion in savings by 2025. Yet, these savings must be reinvested into high-potential assets like salanersen (spinal muscular atrophy) and felzartamab (IgA nephropathy). The risk lies in over-optimism: even with $800 million in savings, Biogen's pipeline lacks blockbuster potential to replace MS revenue.

The Bull Case: A Fragile Optimism

Biogen's revised full-year guidance ($15.50–$16.00 EPS) reflects confidence in its new products and cost structure. The company's P/E ratio of 12.87 is attractive, and its 75.65% gross margin suggests operational strength. However, the bull case is fragile.

• Alzheimer's Uncertainty: LEQEMBI's long-term adoption depends on reimbursement policies and patient retention. If its efficacy wanes or side effects emerge, the drug could face a backlash.
• Pipeline Depth: Biogen's late-stage pipeline is promising but thin. Salanersen and felzartamab are high-risk, high-reward bets.
• MS Resilience: The MS portfolio's decline is accelerating. Even with VUMERITY, Biogen's U.S. MS revenue is unlikely to grow meaningfully.

Investment Implications: Proceed with Caution

For investors, Biogen presents a high-risk, high-reward trade. The Q2 beat and strong balance sheet (with $2.8 billion in cash) justify a cautious bullish stance. However, the company's long-term sustainability is contingent on:
1. LEQEMBI's continued growth without major safety or reimbursement issues.
2. Successful commercialization of SKYCLARYS in new indications.
3. Execution on cost discipline without sacrificing R&D.

A diversified portfolio is essential. While Biogen's near-term outperformance is real, its core MS business is in terminal decline. Until new products achieve blockbuster status, the bull case remains a hail Mary—exciting but precarious.

In conclusion, Biogen's Q2 beat is a victory, but it masks a deeper crisis. The company's ability to reinvent itself hinges on its pipeline and cost structure. For now, investors should monitor these metrics closely—and prepare for a bumpy ride.