Biogen Inc. (BIIB): PESTLE Analysis [Nov-2025 Updated]

You're looking for a clear, actionable breakdown of the external forces shaping Biogen Inc. (BIIB) right now, and honestly, the landscape is defined by two things: the Alzheimer's market and US drug pricing reform. Here's the quick math: if Leqembi's uptake hits even a fraction of its potential, everything changes, but the political and economic headwinds are real. The Inflation Reduction Act (IRA) and Centers for Medicare & Medicaid Services (CMS) coverage decisions are directly challenging the $26,500 annual price tag for Leqembi, a key driver for the projected $10.5 billion 2025 total revenue. Still, the rapidly aging global population creates undeniable sociological demand, so you have to map these near-term risks to clear actions across all six PESTLE factors.

Biogen Inc. (BIIB) - PESTLE Analysis: Political factors

Increased US government focus on drug price negotiation via the Inflation Reduction Act (IRA)

The Inflation Reduction Act (IRA) of 2022 is a seismic shift in U.S. pharmaceutical policy, and you need to see it as a hard constraint on future revenue, not just a threat. The law grants Medicare the power to negotiate prices for high-cost, single-source drugs, with the first negotiated prices taking effect in 2026. Biogen, as a major producer of biologics (large-molecule drugs), gets a slight reprieve: biologics are eligible for negotiation after 11 years on the market, versus only 7 years for small-molecule drugs. That's a critical difference for pipeline prioritization.

Here's the quick math: analysts estimate the IRA could reduce the average biologic's lifetime revenue by 3% to 4%. This forces Biogen to focus on launch price strategy and maximizing sales in the pre-negotiation window. The second round of drugs for the 2027 negotiation year was announced in early 2025, and while no Biogen products were on the initial 2026 list, the company's older, high-spend biologics remain at risk for future cycles.

Potential for accelerated FDA approval pathways for neurodegenerative drugs, like those in their pipeline

The U.S. Food and Drug Administration (FDA) regulatory environment for neurodegenerative drugs is a major opportunity, defintely driven by political pressure to address diseases like Alzheimer's. The agency's use of the accelerated approval pathway, first for Aduhelm (aducanumab) and then for the initial clearance of Leqembi (lecanemab), sets a precedent for Biogen's deep pipeline.

This pathway allows a drug to be approved based on a surrogate endpoint (a measure that is reasonably likely to predict clinical benefit), like the reduction of amyloid beta plaque, before definitive clinical benefit is confirmed. For example, Biogen's investigational antisense oligonucleotide therapy, BIIB080, which targets the tau protein, received FDA Fast Track designation in April 2025. This designation helps speed up the review process, which is a clear political signal that the government wants to see these treatments reach patients faster.

Global geopolitical tensions impacting supply chain stability for complex biologics manufacturing

Geopolitical instability, particularly the threat of trade tariffs and rising protectionism, forces a costly but necessary shift toward domestic manufacturing. Biogen is actively mitigating this risk by 'reshoring' capacity. The company announced a $2 billion investment to expand its existing manufacturing footprint in North Carolina's Research Triangle Park (RTP) in 2025.

This investment is a direct response to political pressure, like the threat of tariffs up to 200% on pharmaceutical imports. The goal is simple: secure the supply chain for complex biologics (large-molecule drugs). As of 2025, more than 90% of Biogen's innovator commercial medicines already have manufacturing and quality control testing in the U.S., which helps buffer against international supply shocks.

• Invest $2 billion in North Carolina manufacturing.
• Eighth RTP plant operational in the second half of 2025.
• >90% of innovator commercial medicines manufactured in the U.S.

Payer coverage decisions, especially from the Centers for Medicare & Medicaid Services (CMS), directly limiting market access for new Alzheimer's treatments

Payer coverage decisions, especially those made by the Centers for Medicare & Medicaid Services (CMS), are the primary political bottleneck for new Alzheimer's treatments like Leqembi (lecanemab). While Leqembi received traditional FDA approval, CMS coverage is still tied to a registry requirement under its National Coverage Determination (NCD), which restricts immediate, broad access.

The good news is that CMS is anticipating significant uptake, which means the political will for access is there, even with constraints. The agency expects Medicare Part B spending on Leqembi to reach approximately $3.5 billion in 2025 across fee-for-service and Medicare Advantage programs. This spending forecast implies coverage for up to 130,000 patients in 2025, a massive market if the registry requirement doesn't slow adoption too much. Leqembi's annual list price is around $26,500 per patient, so even small changes in the CMS NCD have multi-billion-dollar implications for Biogen and its partner, Eisai.

Biogen Inc. (BIIB) - PESTLE Analysis: Economic factors

The core economic challenge for Biogen Inc. in 2025 is balancing the financial volatility of its legacy Multiple Sclerosis (MS) franchise against the massive, but slow-starting, revenue potential of its new Alzheimer's drug, Leqembi. Your strategic focus needs to be on fortifying the balance sheet against rising capital costs while aggressively managing the high-profile launch of Leqembi.

High interest rates increasing the cost of capital for long-term R&D investments.

In a high-rate environment, the cost of capital (the return a company must earn to justify a project) for a biotech company with a long research and development (R&D) cycle is defintely elevated. Biogen is exposed to this risk, holding approximately $6.3 billion in total debt as of the end of 2024. While the company's current interest coverage is strong-its Earnings Before Interest and Tax (EBIT) covers its interest expense a robust 14.2 times over-any need for significant new borrowing to fund its late-stage pipeline, like the Phase 3 trials for felzartamab, will be more expensive. That's the quick math: higher rates mean less R&D bang for your borrowed buck.

Here is a snapshot of Biogen's debt profile as of mid-2025:

Global inflation pressuring manufacturing costs for key therapies, including Tecfidera and Spinraza.

Global inflation and supply chain disruptions are a persistent headwind, increasing the cost of goods sold (COGS). Biogen's 2024 Annual Report explicitly noted the risk of 'increased cost of goods due to factors such as inflation and supply chain disruptions.' To counter this, the company launched its Fit for Growth program, which is expected to generate approximately $1 billion in gross savings and $800 million net of reinvestment by the end of 2025.

Still, the pressure on legacy drugs is clear:

• Tecfidera is facing severe generic erosion, particularly in Europe, contributing to a 7% year-over-year decline in the MS franchise's 2024 revenue, which totaled $4.35 billion.
• Spinraza sales declined 8.5% to $392.7 million in Q2 2025, a drop partially driven by competitive and cost pressures.

Payer pushback on the high list price of Leqembi (an estimated $26,500 per year) creating revenue uncertainty.

The annual list price for Leqembi is set at $26,500 per patient before discounts or rebates, a price point that invites intense scrutiny from payers. The Centers for Medicare & Medicaid Services (CMS) projected that Medicare spending on Leqembi could hit $3.5 billion across the entire program in 2025. This high-cost, high-volume projection creates a clear incentive for major payers to implement strict utilization management and prior authorization protocols, which slows patient uptake.

The slow rollout is evident in the sales figures. While growing, Leqembi's global in-market sales were approximately $121 million in Q3 2025, which is modest compared to the drug's blockbuster potential. The new at-home subcutaneous injection version, Leqembi IQLIK, approved in August 2025, is a key action to improve access and, hopefully, accelerate revenue.

Strong US dollar potentially reducing the value of international sales revenue.

As a global biopharma company, a strong US dollar (USD) against foreign currencies directly reduces the USD value of international sales when repatriated. Biogen's initial 2025 profit forecast was explicitly hurt by the strong dollar. The company now reports its financial guidance in 'constant currency,' a practice that highlights the underlying business growth but does not eliminate the foreign exchange (FX) translation risk for investors. The continued competitive pressure on the ex-U.S. MS business, particularly in Europe, means a strong USD further compounds the revenue decline in these international markets.

The company's total revenue for 2025 is expected to be approximately flat to increasing 1% at constant currency versus the 2024 total revenue of approximately $9.7 billion. This flat outlook, despite the growth of new products, underscores the powerful counter-effect of both generic competition and adverse foreign exchange rates on the legacy portfolio.

Next Step: Finance: Model the impact of a 5% USD appreciation on 2026 ex-U.S. MS revenue by the end of the quarter to quantify the FX risk.

Biogen Inc. (BIIB) - PESTLE Analysis: Social factors

Rapidly aging global population dramatically increasing the prevalence of Alzheimer's disease.

The most significant social factor for Biogen Inc. is the demographic tidal wave of an aging global population, which directly fuels the market for its core neurology franchise. This isn't just a distant trend; it's a near-term market reality. In the United States alone, an estimated 7.2 million Americans aged 65 and older are living with Alzheimer's dementia in 2025. That number is projected to rise to nearly 13 million by 2050, representing a massive, growing patient pool for disease-modifying therapies like Leqembi.

This prevalence translates into staggering societal costs. The total payments for health care, long-term care, and hospice services for people with dementia in the US are projected to reach $384 billion in 2025. This immense financial burden on public and private systems creates a strong incentive for payers to eventually cover effective treatments that can slow disease progression, even if those treatments are expensive. The market opportunity is defintely clear.

Heightened public and patient advocacy for access to novel Alzheimer's treatments, driving demand.

Patient and public advocacy groups have become powerful forces, directly influencing regulatory and reimbursement decisions. The debate around access to amyloid-targeting drugs has been highly public, with groups spending millions on campaigns to pressure the US government to relax coverage restrictions. This means Biogen doesn't just market to doctors and payers; it must also win the support of the patient community.

The societal desire for a solution is palpable. Survey data suggests that most Americans believe early detection of Alzheimer's is important, and nearly all would want a simple diagnostic test if it were available to allow for early diagnosis and treatment. This high level of public awareness and demand for early intervention is a powerful tailwind for Biogen's Alzheimer's franchise, providing a strong counter-pressure against cost-containment efforts by government agencies.

Growing societal focus on health equity, pressuring Biogen to ensure diverse patient representation in trials.

The push for health equity is a critical social factor, especially in Alzheimer's disease where disparities are stark. Older Black Americans are about twice as likely, and older Hispanic Americans are about one and a half times as likely, to have Alzheimer's or other dementias compared to older White Americans. This reality puts significant pressure on Biogen to ensure that its clinical trials and commercial programs reflect the true patient population-it's both an ethical imperative and a regulatory necessity for full market acceptance.

Biogen has responded with a multi-channeled health equity strategy, including setting race and ethnicity recruitment targets for its trials. For example, a Biogen-supported Mobile Research Unit pilot in 2023 pre-screened 834 potential study participants, with 62% representing Black and Hispanic populations. This effort is essential to build trust and ensure the data on new treatments are applicable to all affected communities. Here's the quick math on the disparity:

Public perception challenges following the Aduhelm controversy still affecting trust in new drug launches.

The controversy surrounding the 2021 accelerated approval and subsequent discontinuation of Aduhelm in early 2024 continues to cast a long shadow over Biogen's reputation and the entire Alzheimer's drug class. This event generated outrage and significantly eroded public and professional trust in the regulatory process for new drugs. The effects of that public discourse are long-lasting and far-reaching, impacting health law and clinical practice.

This lingering skepticism is a major headwind for the launch of Biogen's subsequent Alzheimer's treatment, Leqembi (developed with Eisai Co Ltd.). The slow US launch of Leqembi exacerbated worries of declining sales in 2024. While Leqembi's collaboration revenue for Biogen grew significantly to $33 million in Q1 2025 from $2.8 million in Q1 2024, the uptake is still slow given the enormous market need. What this estimate hides is the ongoing need to rebuild trust with clinicians, patients, and payers, which slows the commercial ramp-up.

• Actionable Risk: Public trust erosion slows Leqembi uptake.
• Metric: Q1 2025 Leqembi collaboration revenue was $33 million.
• Action: Must invest heavily in real-world data and transparent communication.

Biogen Inc. (BIIB) - PESTLE Analysis: Technological factors

You're watching Biogen Inc. (BIIB) pivot its entire R&D strategy, and the technological factors here are a double-edged sword: they create breakthrough therapeutic opportunities but also accelerate the decay of their legacy revenue streams. It's a classic innovator's dilemma, and the company is responding by pouring capital into next-generation platforms like antisense oligonucleotide (ASO) and AI.

Here's the quick math: Biogen is reallocating capital from its mature Multiple Sclerosis (MS) franchise to fund these high-growth, high-risk areas. The success of this shift defintely hinges on the pipeline's ability to deliver, and fast.

Advancements in gene therapy and antisense oligonucleotide (ASO) technology opening new therapeutic avenues beyond current MS and SMA treatments

Biogen is leveraging its deep expertise in neurology to push into gene therapy and ASO (a type of nucleic acid therapy that modulates gene expression) technologies. This is a critical move to diversify away from their core MS and Spinal Muscular Atrophy (SMA) business, which is facing heavy competition.

This focus is clear in their 2025 strategic deals. For example, in the first quarter of 2025, Biogen made a $165 million upfront payment to Stoke Therapeutics for the development of zorevunersen, an ASO for Dravet syndrome, a rare genetic epilepsy. This is a clear investment in a new therapeutic area using advanced technology.

Also, the company's investigational anti-tau ASO, BIIB080, a potential treatment for Alzheimer's disease, received FDA Fast Track designation in April 2025, which speeds up the regulatory review process. This highlights the strategic importance of ASO technology in their late-stage pipeline. Plus, their internal ASO, salanersen, for SMA, is advancing to a registrational Phase 3 study based on positive Phase 1b data in children previously treated with gene therapy.

The company is still evaluating the utilization of a new gene therapy manufacturing facility, which was expected to be completed in 2025, indicating a strategic re-evaluation of their in-house gene therapy manufacturing footprint.

Use of Artificial Intelligence (AI) and machine learning to accelerate drug discovery and clinical trial design

The entire pharmaceutical industry is turning to Artificial Intelligence (AI) and machine learning to cut the average 12-to-18-year timeline and the $2.6 billion average cost of drug development. Biogen is no exception, integrating AI across its genomics and biomarker research platforms.

Biogen is using AI tools to analyze large-scale genomic datasets to better understand the genetic drivers of complex neurological diseases like Alzheimer's and Parkinson's. They are also testing machine learning models to improve clinical trial design, specifically for patient stratification (selecting the right patients) and biomarker discovery, which is vital in complex neurological disorders.

The broader market trend is a tailwind for this investment. Industry-wide, pharmaceutical spend on AI in drug discovery is projected to top $3 billion by the end of 2025. Biogen is exploring AI to enhance patient identification and improve operational efficiency across its commercial and development divisions.

Competition from biosimilars eroding market share for established biologics like Rituxan and potentially others

The technological maturity of biosimilars is a persistent, near-term headwind that directly impacts Biogen's top-line revenue. Biosimilars-biological products highly similar to an already approved biological medicine (the reference product)-are now a major competitive factor.

The company continues to face significant competitive pressures in its legacy MS franchise, particularly for TECFIDERA in European markets, where generic and biosimilar entries are accelerating.

Biogen's collaboration with Samsung Bioepis, which develops and commercializes biosimilars, is a strategic hedge against this trend, though it still results in profit sharing expenses. For the third quarter of 2025, this collaboration alone accounted for a net expense of approximately $67 million.

The table below shows the Q3 2025 revenue for the company's anti-CD20 therapeutic programs, which include the reference product for biosimilars like RITUXAN, highlighting the ongoing erosion challenge.

Need for sophisticated digital health tools to monitor and manage patients on complex, new-generation therapies

The new generation of therapies, like LEQEMBI for Alzheimer's disease, are complex, often requiring specialized administration, patient monitoring, and risk management (like managing Amyloid-Related Imaging Abnormalities, or ARIA). This complexity demands sophisticated digital health tools and logistical solutions.

Biogen is actively investing in technology to simplify the patient journey and improve access. For example, they are addressing the logistical challenges of the LEQEMBI launch by focusing on subcutaneous dosing (an easier injection under the skin) to improve patient access, with a subcutaneous initiation therapy expected in the first half of 2026.

Operational challenges are being addressed through innovative solutions like the use of blood-based biomarkers to streamline patient identification and monitoring, which is a major technological step toward decentralizing care from specialized infusion centers. These advancements are crucial for driving adoption of new products, which saw a 67 percent year-over-year growth in Q3 2025 across Alzheimer's disease, rare disease, and postpartum depression launch products.

The key technological actions for Biogen include:

• Developing subcutaneous formulations for complex IV drugs like LEQEMBI.
• Implementing AI and blood-based biomarkers to simplify patient screening and monitoring.
• Integrating digital systems to manage patient adherence and safety for therapies like QALSODY and SKYCLARYS.

Finance: Track R&D investment allocation to ASO/Gene Therapy versus AI platforms by end of Q4 2025.

Biogen Inc. (BIIB) - PESTLE Analysis: Legal factors

Ongoing patent litigation protecting key multiple sclerosis (MS) drugs from generic competition

You know that in the pharmaceutical world, protecting your intellectual property is the only way to sustain revenue, and Biogen is defintely in a high-stakes legal battle to shield its core multiple sclerosis (MS) portfolio. The company's legal strategy is complex, with mixed results globally, and the financial impact is already baked into the 2025 outlook.

The U.S. market for Tecfidera (dimethyl fumarate) is largely lost to generics following key patent invalidations in 2020 and the Supreme Court's refusal to hear the appeal in 2022. The financial headwind from this generic entry is severe: Tecfidera's global sales, which peaked at $4.4 billion in 2019, were projected to decrease to around $552 million in 2025, based on a late 2023 analysis. That's a massive drop, and it forces a complete business pivot.

In Europe, the fight continues. While Biogen had regulatory marketing protection until February 3, 2025, it is now facing increased competitive pressure in the second half of 2025. Still, the company scored a win in Germany in early 2025 by securing preliminary injunctions against generic entry based on a formulation patent (EP 2 653 873) that expires in February 2028. Plus, Biogen is now facing biosimilar competition for Tysabri (natalizumab) in the U.S. for the first time, with Sandoz launching its biosimilar in November 2025. This legal landscape is a constant source of revenue volatility.

Here's a quick summary of the near-term patent risks and outcomes:

• Tecfidera (US): Generics launched. Revenue expected at approximately $552 million in 2025, down from a peak of $4.4 billion.
• Tecfidera (EU): Regulatory protection expired in February 2025, but a German patent remains a temporary barrier.
• Tysabri (US): Biosimilar competition began in November 2025.
• Tysabri (Royalty Case): A district court ruled in 2025 that Biogen owes over $88 million in royalties for post-expiration sales of the drug.
• Vumerity (US): Biogen and Alkermes settled a patent suit with Zydus Lifesciences in July 2025 over a proposed generic copy.

Strict FDA post-marketing surveillance requirements for accelerated approval drugs, like Leqembi, demanding extensive Phase 4 data

The regulatory environment for accelerated approval drugs, like Leqembi (lecanemab), is incredibly strict, and it creates a significant legal and operational burden. Even though Leqembi received traditional FDA approval in July 2023, the agency imposed explicit post-marketing requirements (PMRs) under section 505(o) of the FDCA. The FDA needs more real-world data to fully assess known serious risks, specifically Amyloid Related Imaging Abnormalities (ARIA).

This isn't just a research project; it's a legal mandate that requires Biogen and its partner Eisai to conduct extensive Phase 4 studies and maintain a patient registry. The registry must collect detailed, sensitive data points, including ApoE genotype (a genetic risk factor), baseline MRI findings (like microhemorrhages), and information on concomitant medications, such as antithrombotic therapy. This regulatory demand directly impacts the drug's commercial adoption, as it adds complexity to the prescribing and monitoring process.

Still, the drug is gaining traction. Global in-market sales for Leqembi were approximately $160 million in the second quarter of 2025. That's a strong number, but the legal requirement for ongoing, high-cost surveillance remains a major operational risk. The annual list price for Leqembi is $26,500 per year, which also puts it under intense public and governmental pricing scrutiny.

Increased scrutiny from the Federal Trade Commission (FTC) on potential anti-competitive practices in the pharmaceutical sector

The Federal Trade Commission (FTC) has adopted a notably aggressive stance on anti-competitive practices in the pharmaceutical industry, especially those designed to delay or suppress generic and biosimilar competition. Under Chair Lina Khan, the agency is focusing heavily on exclusive dealing claims and rebate bundling with Pharmacy Benefit Managers (PBMs).

Biogen has direct exposure to this scrutiny. In July 2025, an Illinois federal court dismissed an antitrust class action that alleged Biogen paid PBMs kickbacks to favor branded Tecfidera over its generic alternatives. While the court dismissed the case, the underlying legal theory-that manufacturers use PBM rebates to create anti-competitive formulary tiers-is a major focus of the FTC.

The broader regulatory environment is also tightening. The FTC is actively hosting listening sessions in 2025 to inform a joint report on combatting anticompetitive practices, specifically targeting strategies to delay generic entry and PBM relationships. This means the legal environment is shifting against incumbent drugmakers, forcing them to rethink long-standing commercial tactics like rebate agreements.

Global data privacy regulations (e.g., GDPR) complicating the collection and use of patient data for R&D

Operating as a global pharmaceutical company means navigating a patchwork of stringent data privacy regulations, most notably the European Union's General Data Protection Regulation (GDPR). This complicates Biogen's ability to collect, process, and use the vast amounts of sensitive patient data needed for its global R&D programs, clinical trials, and post-marketing surveillance, like the Leqembi registry.

The legal overhead is significant. For large, multinational enterprises like Biogen, an estimated 88% of global firms spend over $1 million annually on GDPR compliance, with 40% spending over $10 million. That's the cost of doing business, covering everything from legal consultation and technology upgrades to ongoing employee training.

The risk of non-compliance is even higher, as fines can reach a maximum of €20 million or 4% of annual global revenue, whichever is greater. Biogen's core business is in sensitive neurological and rare disease research, which requires handling highly protected health information (PHI). This makes the company a prime target for regulatory oversight, forcing massive investment in data anonymization and cross-border data transfer legal frameworks. You have to spend big money to move patient data legally across borders.

Biogen Inc. (BIIB) - PESTLE Analysis: Environmental factors

Increasing pressure from investors and regulators to meet ambitious Environmental, Social, and Governance (ESG) targets.

You are seeing a clear shift where ESG performance is now a core factor in valuation, not just a compliance issue. Biogen Inc. has responded with its 'Healthy Climate, Healthy Lives' strategy, which aims to make the company fossil fuel-free across its global operations by 2040. This goes beyond the typical net-zero pledge, and it's a strong signal to institutional investors like BlackRock. The company maintained its commitment to sourcing 100% renewable electricity for its sites and facilities in 2024, which helps manage its Scope 2 (purchased energy) emissions.

The real challenge lies in the supply chain (Scope 3 emissions), which is the largest part of the company's carbon footprint. Biogen is addressing this by setting a critical 2025 target for its suppliers.

• Mandate suppliers set climate targets by 2025.
• Screen 75% of Tier I supplier spend for ESG risk by 2025.
• Expand ESG risk screening to 500 Tier II supplier sites by 2025.

Need to manage and reduce the carbon footprint of global manufacturing and cold-chain logistics for biologics.

The environmental cost of cold-chain logistics is substantial in the pharmaceutical industry, emitting 55% more greenhouse gas emissions than the automotive sector. This is a direct risk for Biogen, especially with the launch of biologics like Leqembi (lecanemab), which require strict temperature control during transport and storage.

In 2024, Biogen's total Scope 3 emissions-which include the value chain, logistics, and purchased goods-were over 4.6 times its direct operational emissions. This is where the company must defintely focus to meet its long-term goals. One clean one-liner: Cold chain logistics is the new emissions battleground.

Scrutiny over pharmaceutical waste disposal and water usage at production facilities.

Regulators and local communities are increasingly focused on the disposal of pharmaceutical waste, especially non-hazardous waste from manufacturing, and the strain on local water resources. Biogen's 2024 Scope 3 emissions from Waste Generated in Operations were relatively small at 240 MT CO2e, but the company is actively working with waste vendors to divert waste from landfills.

Water scarcity is a risk, particularly at key manufacturing sites like the RTP Drug Substance facility in North Carolina, where the company has previously faced potential costs associated with trucking in water due to scarcity. To mitigate this, Biogen is increasing water recycling at that facility and has screened its critical supplier sites for water risk.

Climate change risks potentially disrupting the global supply chain for raw materials and active pharmaceutical ingredients (APIs).

The global nature of the pharmaceutical supply chain makes it vulnerable to climate change-related physical risks, such as extreme heat, flooding, and cyclones. Biogen uses a cognitive supply chain risk management platform, Resilinc, to monitor for environmental and social disruptions, and has conducted physical climate risk assessments on its own sites and 10 critical third-party manufacturing sites. This is a necessary, proactive step to ensure continuity of supply for critical drugs.

Finance: defintely track Leqembi's quarterly uptake against the $1.5 billion 2025 consensus sales estimate by year-end. The drug's Q1 2025 sales were $96 million and Q2 2025 sales were about $160 million, with Q3 2025 sales rising to approximately $121 million, showing sequential growth but still a significant gap to the annual target.