Biogen's Q2 Earnings: Can Leqembi and Cost Discipline Save the Day?

Biogen (NASDAQ: BIIB) faces a pivotal moment as it navigates declining sales of its multiple sclerosis (MS) drugs and bets big on its Alzheimer's therapy Leqembi. With the company's Q2 2025 earnings report due July 31, investors will scrutinize whether accelerating sales of Leqembi, combined with aggressive cost-cutting, can offset headwinds from generics and regulatory hurdles. Here's why the stakes are higher than ever—and why this stock could be a contrarian buy.

Leqembi's Growth: A Silver Lining in a Stormy Quarter

Leqembi, co-developed with Eisai, has emerged as Biogen's most promising growth driver. Despite a 6% drop in Q3 MS drug sales to $1.1 billion due to generic competition, Leqembi's global sales surged 66% year-over-year to $67 million in Q3 (the closest available data to Q2). In the U.S., sales grew 33% sequentially to $39 million, driven by a 40% increase in new prescribers—a sign of expanding clinical adoption.

The therapy's momentum, however, faces European regulatory hurdles. While the European Commission updated its review for lecanemab (Leqembi's EU name) in March, access remains limited. Biogen is countering this by promoting blood-based diagnostics as an alternative to PET scans, which have slowed uptake. If successful, this could unlock broader adoption in the EU, where Leqembi is still under scrutiny.

Cost Discipline: A Lifeline for Margins

Biogen's “Fit for Growth” initiative aims to cut $1 billion in costs by . While Q2-specific savings data remains elusive, the company has already reallocated resources to high-growth areas like Leqembi. In Q3, adjusted EPS rose to $3.44, exceeding estimates, with full-year guidance raised to $16.10–$16.60. This suggests that cost-cutting, paired with strategic investments, is starting to pay off.

The challenge? Sustaining this discipline while navigating a patent cliff for its MS drugs. Tecfidera's European patent, critical until 2028, faces generic challenges, and sales have already declined 9% year-over-year. Without a major new MS drug in the pipeline, Biogen must rely on Leqembi and other therapies like Skyclarys (Friedreich's ataxia) to offset this drag.

Pipeline Progress: Beyond Leqembi

Biogen's pipeline offers hope. The FDA's Fast Track designation for tau-targeting therapy BIIB080 in April / 2025 underscores its commitment to Alzheimer's innovation. Meanwhile, Skyclarys sales rose 8% sequentially to $82 million, boosting rare disease revenue by 10% year-over-year.

The Risks: Regulatory Delays and Generic Pressure

Despite optimism, risks loom large. The European regulatory review for Leqembi could extend delays, while MS generics continue to erode margins. Additionally, the $46 million R&D charge in Q2 2023 (impacting EPS) highlights the financial toll of its research bets.

Investment Thesis: A Long-Term Play on Innovation

Biogen's stock trades at a forward P/E of 9.18, suggesting the market has already priced in its near-term struggles. GuruFocus's $210.85 valuation—a 62% upside from current levels—hints at undervaluation. Analysts' average $169.26 target, while cautious, still implies 30% upside.

The contrarian case rests on two pillars:
1. Leqembi's Scalability: If the therapy can achieve $500 million in annual U.S. sales by 2026 (a conservative estimate), it could offset 20% of MS revenue declines.
2. Cost Savings Execution: The “Fit for Growth” program's ability to deliver $800 million in net savings by 2025 will be critical to maintaining EPS growth.

Final Take: Hold for the Long Game

Biogen is a stock of extremes—prone to volatility due to patent expirations and regulatory twists. Yet its pipeline, led by Leqembi and BIIB080, positions it to dominate Alzheimer's therapy for years. While Q2 results may disappoint on MS sales, investors should focus on the broader trajectory: a company transitioning from legacy drugs to a future built on neuro-innovation.

Historically, BIIB has averaged a 2.12% return around earnings releases since 2022, with a 50% win rate over ten days, suggesting short-term momentum potential.

For conservative investors, wait for post-Q2 analyst revisions before diving in. Aggressive investors, however, may find this a compelling entry point, especially with shares down 40% in 2024. Biogen's journey is far from over—and its survival hinges on turning Leqembi's promise into profit.

Action Item: Monitor the July 31 earnings call for clarity on Leqembi's Q2 sales trends and cost-cutting progress. Historically, BIIB has shown a 2.12% maximum return around earnings releases since 2022, with a 50% win rate over ten days. If the guidance is raised, this could spark a rally, as past events often drove short-term momentum.

Disclaimer: This analysis is for informational purposes only. Investors should conduct their own research or consult a financial advisor before making decisions.