Introduction
Biogen (NASDAQ:BIIB) is down more than 25% on 21 March 2019, shedding close to $20 billion in market capitalization, as the company announced the shocking news that it was going to discontinue the Phase 3 trials for its drug to treat Alzheimer’s disease. If successful, the drug would have been the first of its kind and a blockbuster for the company. However, numerous potential drugs to treat the disease have failed after showing early promise, so this news couldn’t have been totally unexpected. However, the timing is a surprise, with the company giving no advance indication that such news was in the offing.

Company background and financials
Biogen is one of the largest biotech companies in the world, with annual revenue of $13 billion and net income exceeding $4 billion. Its products include Tecfidera to treat multiple sclerosis and Spinraza to treat spinal muscular atrophy. The discontinuance of the Alzheimer’s drug trial should have no effect on near-term revenue, and in fact, could provide a modest boost to profits if R&D costs associated with developing the drug are reduced.

The company’s results for 2018 were good. It grew revenues 9.6% over the prior year, and had GAAP EPS of $21.58. It declared non-GAAP EPS of $26.20 by excluding intangible amortization and the like. The company has an under-leveraged balance sheet with just $1 billion of net debt. It has high margins befitting a company with patent-protected drugs, with operating margin exceeding 40%.

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