Key Highlights

● Biogen posted a GAAP loss driven by acquisition charges.

● Revenue grew during the quarter.

● The company raised the low end of its full-year guidance.

● Biogen continues working to offset declining older drug sales.

Biogen grew revenue and raised the low end of its guidance, but acquisition-related charges pushed the biotech to a GAAP loss and its shares slid.

Biogen (NASDAQ:BIIB) slid on Wednesday, October 28, falling on the S&P 500 after the biotechnology company reported a loss under generally accepted accounting principles, driven by acquisition-related charges. The headline loss overshadowed several positives in the report.

Why the GAAP Loss Matters

Companies report earnings in two main ways. GAAP figures follow standard accounting rules and include one-time items such as acquisition costs, restructuring charges and write-downs. Adjusted, or non-GAAP, figures strip many of those items out to show underlying performance.

Large acquisition charges can push GAAP results into the red even when the core business is growing. That appears to have been the case for Biogen this quarter. Still, headline losses can unsettle investors, and the market's reaction suggested that the charges drew attention away from the revenue growth.

A Company in Transition

Biogen, based in Cambridge, Massachusetts, is best known for its treatments for multiple sclerosis and neurological diseases. In recent years it has been working to offset declining sales of older multiple-sclerosis drugs with newer products and with acquisitions that broaden its pipeline.

That strategy requires upfront spending, and the associated charges can create volatile quarterly results. Raising the low end of guidance narrowed the range toward the upper end, but it was not enough to keep the shares from sliding on Wednesday.

Biotech and Health Care Mixed

Health care was among the eight S&P 500 sectors to finish higher on Wednesday. GE HealthCare (NASDAQ:GEHC) rose after raising its full-year guidance, and Labcorp (NYSE:LH) also gained. In biotech, Genmab (NASDAQ:GMAB) soared after Phase 3 trial data showed its experimental head-and-neck cancer treatment combination cut the risk of death compared with a standard therapy.

Biogen's decline, by contrast, reflected company-specific factors. Long-dated Treasury yields climbed, with the 10-year pushing past a key psychological threshold, which can weigh on biotech valuations since much of the sector's value rests on cash flows expected years into the future.

What to Watch

Investors will look for more detail from Biogen on the expected timing and size of remaining acquisition-related costs, and on the sales trajectory of its newer products.

On the macro side, Thursday brings the advance estimate of third-quarter GDP and September PCE inflation at 8:30 a.m. ET. Drugmaker Merck (NYSE:MRK) reports before the open, offering another read on the pharmaceutical sector, alongside Mastercard (NYSE:MA) and Caterpillar (NYSE:CAT).