Biogen (BIIB)

Biotech company Biogen (NASDAQ:BIIB) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 2.8% year on year to $2.53 billion. Its non-GAAP profit of $4.81 per share was 23.9% above analysts’ consensus estimates.

Company Overview

Founded in 1978 and pioneering treatments for some of medicine's most complex challenges, Biogen (NASDAQ:BIIB) develops and markets therapies for neurological conditions, including multiple sclerosis, Alzheimer's disease, spinal muscular atrophy, and rare diseases.

Over the next few years, therapeutic companies, which develop a wide variety of treatments for diseases and disorders, face strong tailwinds from advancements in precision medicine (including the use of AI to improve hit rates) and growing demand for treatments targeting rare diseases. However, headwinds such as rising scrutiny over drug pricing, regulatory unknowns, and competition from larger, more resourced pharmaceutical companies could weigh on growth.

Biogen competes with pharmaceutical companies like Novartis (NYSE:NVS) and Roche (OTCQX:RHHBY) in multiple sclerosis treatments, Eli Lilly (NYSE:LLY) in Alzheimer's disease with its KISUNLA therapy, and Novartis and Roche again in the spinal muscular atrophy market with their respective ZOLGENSMA and EVRYSDI treatments.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $10.07 billion in revenue over the past 12 months, Biogen has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Biogen’s demand was weak and its revenue declined by 6% per year. This wasn’t a great result and is a sign of lacking business quality.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Biogen’s revenue over the last two years was flat, sugggesting its demand was weak but stabilized after its initial drop.

This quarter, Biogen reported modest year-on-year revenue growth of 2.8% but beat Wall Street’s estimates by 8.2%.

Looking ahead, sell-side analysts expect revenue to decline by 8.3% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Biogen has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average operating margin of 23%.

Analyzing the trend in its profitability, Biogen’s operating margin rose by 3.7 percentage points over the last five years. Zooming in on its more recent performance, we can see the company’s trajectory is intact as its margin has also increased by 1.9 percentage points on a two-year basis.

In Q3, Biogen generated an operating margin profit margin of 22%, up 3.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Biogen, its EPS declined by 13.2% annually over the last five years, more than its revenue. We can see the difference stemmed from higher interest expenses or taxes as the company actually improved its operating margin and repurchased its shares during this time.

In Q3, Biogen reported adjusted EPS of $4.81, up from $4.08 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Biogen’s full-year EPS of $16.74 to shrink by 9.3%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Biogen has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 19.3% over the last five years, quite impressive for a healthcare business.

Taking a step back, we can see that Biogen’s margin expanded by 3.9 percentage points during that time. This is encouraging because it gives the company more optionality.

Biogen’s free cash flow clocked in at $1.32 billion in Q3, equivalent to a 52% margin. This result was good as its margin was 15.5 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Biogen hasn’t been the highest-quality company lately because of its poor revenue and EPS performance, it historically found a few growth initiatives that worked. Its five-year average ROIC was 12%, higher than most healthcare businesses.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Biogen’s ROIC has unfortunately decreased. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Biogen reported $3.86 billion of cash and $6.59 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.47 billion of EBITDA over the last 12 months, we view Biogen’s 0.8× net-debt-to-EBITDA ratio as safe. We also see its $117.9 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Biogen blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed after being lowered. This is weighing on shares, and the stock traded down 4.2% to $142 immediately following the results.

Updated: December 4, 2025 at 11:04 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Biogen.

Biogen isn’t a terrible business, but it doesn’t pass our bar. First off, its revenue has declined over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its impressive operating margins show it has a highly efficient business model, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its diminishing returns show management's prior bets haven't worked out.

Biogen’s P/E ratio based on the next 12 months is 14.2x. This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $178.76 on the company (compared to the current share price of $182.13).