How Does Biogen Make its Money?

Biogen Inc. (BIIB) is at the forefront of the biotechnology industry — one of the world’s most important and least understood sectors. The $73 billion company’s entire product line consists of a handful of very expensive, highly effective drugs that combat some of the worst afflictions humans can suffer, including multiple sclerosis, leukemia, and hemophilia. Unlike many pharmaceutical company's products, Biogen's drugs are not the mass-marketed ones advertised on prime-time TV. Rather, Biogen targets a smaller, more motivated clientele. If you want help with anxiety or your inability to put the fork down, Biogen can’t help you; if you have MS or a handful of other debilitating conditions, it can. (For more, see: 3 Things Biogen's Management Wants You to Know.)

Biogen's drug line is what keeps the company's income statements looking so good and with new products in the pipeline, the future is bright. Revenue came in at $12.3 billion in 2017, up 7% from 2016. Biogen has plans to delve into drugs that counter Alzheimer’s, lupus and stroke. (For more, see: CanBiogen Change How We View Alzheimer's Disease? and Is This Biogen's Next Billion-Dollar Blockbuster?) 

On July 5, 2018, Biogen and Eisai (TYO: 4523), a Japanese pharmaceutical company, announced that their experimental Alzheimer's drug passed the mid-stage of a clinical trial successfully. The highest dose of the drug, provisionally named BAN2401, slowed the progression of the disease after just 18 months of treatment. 

Biogen reported Q2 2018 revenues of $3.4 billion, a 9% increase from Q2 2017.

According to Biogen's own literature, 38% of multiple sclerosis sufferers worldwide use the company's drugs, making the company $8.9 billion. That's pretty impressive since the company manufactures just 12 drugs (nine if you exclude a psoriasis medication available only in Germany). six of the pharmaceuticals Biogen manufactures — Tecfidera, Avonex, Plegridy, Fampyra, Tysabri, and Zinbryta — treat MS. (For related reading, see: The Ups and Downs of Biotechnology.)

Tecfidera costs $128 per daily dose and is the best selling oral MS drug in the United States. Oral MS drugs are a recent development and since Tecfidera went on the market in 2013, some (how many) patients have taken it, mostly in the U.S. and Germany. This has made Tecfidera a multibillion-dollar contributor to Biogen’s revenues. (For more, see: Biogen's Tecfidera Loses Some Luster.)

Tecfidera is just one of Biogen’s MS drugs, though, and each carries a price tag commensurate with huge research and development costs, scarcity and utility. Avonex is taken once a week by MS sufferers at a cost of $6,935 per dose. Biogen recently has tried to shift some of its Avonex users to Plegridy, which is similar in cost but taken less frequently. Ampyra, formulated to make walking easier for MS sufferers, costs $40 per tablet and is taken twice a day. Rounding out Biogen’s MS roster is Tysabri, a monthly infusion treatment administered by a professional that costs upwards of $6,800 per dose. (For related reading, see: Sectors with Similar Pros/Cons as Drug Sector.)

Biogen claims that Tysabri has been administered more than two million times, thus accounting for a major component of the company’s revenue, $1.9 billion in total (two-thirds of which come from the United States). In total, the company's MS medications make up more than 80% of Biogen’s sales. (For related reading, see: Using DCF in Biotech Valuation.)

Q2 2018 MS revenues were $2.3 billion, and the number of patients treated with Biogen's MS drugs globally remained relatively stable compared to last year.

The United States is among the most cancer-ridden countries in the world, largely because it is a wealthy developed nation where the population lives long enough to get cancer. The five countries with higher incidences of cancer are Denmark, France, Australia, Belgium and Norway. Biogen offers a leukemia-fighting drug called Gazyva for use domestically. A year of Gazyva treatment costs $82,600; Gazyva and sister drug Rituxan contributed $377 million to Biogen’s total product revenues in Q2 2018. Rituxan, used to treat both lymphoma and rheumatoid arthritis, costs up to $750 per use. (For related reading, see: Invest in Cancer Research with These 3 Stocks.)

Biogen doesn’t accomplish all this by itself, mind you. Rituxan and Gazyva, for instance, are sold in partnership with fellow pharmaceutical firm Genentech, while Swedish Orphan Biovitrum helps develop and bring Biogen’s hemophilia treatments to market. (For related reading, see: Major Players in the Drug Sector.)

Biogen’s recent income statements are impressive, and the company's pipeline of drugs should keep the company on a steady growth path for at least the next decade. While the company's concentration is in pharmaceuticals to treat multiple sclerosis, Biogen is diversifying by supporting its existing drugs to treat cancers, rheumatoid arthritis and hemophilia and developing new drugs to treat diseases such as Alzheimer’s and lupus, as well as stroke. (For more, see: Is Biogen Worth Owning for the Long Haul?)