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Biogen (BIIB) Q1 Earnings Miss, Aduhelm Setback Leads to Rejig
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Biogen (BIIB - Free Report) reported first-quarter 2022 earnings per share (EPS) of $3.62, which missed the Zacks Consensus Estimate of $4.41. In the year-ago quarter, Biogen had recorded earnings of $5.41 per share.
The EPS was hurt by 76 cents during the first quarter of 2022, reflecting the impact of the write-off of its Alzheimer’s disease drug, Aduhelm inventory. The final national coverage determination released by the Centers for Medicare & Medicaid Services last month for amyloid-beta targeting therapies for the treatment of AD effectively denied all Medicare beneficiaries access to Aduhelm. Biogen has decided to substantially eliminate its infrastructure supporting the commercialization of Aduhelm, retaining minimal resources.
Sales came in at $2.52 billion, down 6% reportedly (5% on a constant currency basis) from the year-ago quarter, hurt by continued lower sales of its key drugs. Sales marginally beat the Zacks Consensus Estimate of $2.50 billion.
Biogen’s stock has declined 13.6% this year so far compared with a decrease of 21.4% for the industry.
Image Source: Zacks Investment Research
Product sales in the quarter were $2.1 billion, down 6.6% year over year. Royalties on sales of Roche’s (RHHBY - Free Report) Ocrevus were $252.3 million in the quarter, up 20.5% year over year. Biogen receives royalties on U.S. sales of Roche’s MS drug, Ocrevus.
Revenues from Biogen’s share of Roche’s drugs, Rituxan and Gazyva declined 18% from the year-ago period to $147 million due to biosimilar competition. Other revenues declined 29.2% in the quarter to $66.1 million.
Multiple Sclerosis Revenues
Biogen’s MS revenues were $1.65 billion in the reporter quarter, including Ocrevus royalties, which declined 3% reportedly (2% on a constant currency basis) year over year.
Tecfidera sales declined 14.5% to $409.9 million in the quarter as multiple generic products have been launched in the United States. Biogen expects entry of generics for the drug in European markets during the second quarter, which will likely hurt the sales further.
New drug Vumerity recorded $128 million in sales, higher than $124.9 million in the previous quarter. Sales of the drug gained 73.9% year over year.
Tysabri sales rose 3.5% year over year to $520.8 million.
Combined interferon revenues (Avonex and Plegridy) in the quarter were $309.6 million, down 22.7% year over year.
Other Products
Sales of spinal muscular atrophy (SMA) drug Spinraza declined 9% (6% on a constant currency basis) year over year to $472.5 million.
In the quarter, biosimilars revenues decreased 5% year over year (1% in constant currency) to $194.3 million.
Biogen markets three anti-TNF biosimilars in Europe — Flixabi (a biosimilar referencing Remicade), Benepali (a biosimilar referencing Enbrel) and Imraldi (a biosimilar referencing Humira) through Samsung Bioepis, the joint venture with its South Korean partner, Samsung Biologics. Last month, Biogen completed its equity stake sale in the joint venture to Samsung Bioepis for a payment of up to $2.3 billion. Biogen recorded a payment of $1 billion in cash as part of the sale upon closing.
New Alzheimer’s drug, Aduhelm, approved in June 2021, recorded sales of $2.8 million in the first quarter, compared with $1.0 million in the previous quarter. Sales of the drug are likely to be minimal going forward as the company significantly reduces commercial infrastructure. The company will provide resources only to manage patient access programs, including a continued free drug program for patients currently on treatment in the United States.
Research and development (R&D) expenses were $551.7 million, up 7.4% year over year. Selling, general and administrative (SG&A) expenses gained 6.7% year over year to $634.9 million.
Restructuring Initiatives
Following the failure of Aduhelm commercialization, Biogen announced a set of near-term operational priorities to drive renewed growth and value creation over time. The initiatives are also believed to result in significant cost savings annually.
The company’s substantial elimination of global commercial infrastructure supporting Aduhelm, along with other new cost reductions, is estimated to result in annualized cost savings of approximately $500 million. Existing cost-saving initiatives are also targeting another $500 million in annualized savings.
Biogen is also planning to focus on R&D activities with the highest probability of success. The company can accelerate, terminate, divest, or partner certain programs as well as it continues to evaluate new internal and external opportunities within its therapeutic areas of focus and adjacencies. The company is planning to prioritize its R&D activities based on data from two late-stage studies evaluating another AD candidate, lecanemab, and a depression disorder candidate, zuranolone, expected later this year. Biogen is developing zuranolone in partnership with Sage Therapeutics (SAGE - Free Report) .
Biogen has also initiated a rolling submission of new drug applications to the FDA seeking approval for lecanemab and SAGE’s zuranolone for treating early AD and major depressive disorder, respectively. Biogen and Sage announced data from a late-stage study in February that demonstrated a rapid and statistically significant reduction in depressive symptoms following treatment with zuranolone.
The company plans to focus more on emerging international markets, especially China and certain markets in both Latin America and the Middle East, to boost growth. It is also depending on its newly-approved biosimilar drug, Byooviz (referencing Lucentis), and other four biosimilar candidates to drive revenues of its biosimilar segment.
Biogen’s initiatives also include the deployment of savings from cost-reduction initiatives as well as its existing cash resources toward strategic initiatives to drive top-line growth as well as to provide returns through share repurchases. The company has $2.8 billion authorized for share repurchase. It plans to use part of the authorized amount for repurchases through the end of 2022.
2022 Guidance Maintained
The company reiterated its guidance for total revenues as well as earnings for 2022.
Total revenues are expected in the range of $9.7-$10.0 billion in 2022. The company expects continued erosion of Tecfidera’s sales in the United States. Generic versions of Tecfidera are also expected to be launched in the EU in the first half of 2022. The launch of generics will erode the drug’s ex-U.S. sales. The guidance also assumes significant erosion of Rituxan in the United States. The guidance also reflects the write-off of Aduhelm inventory.
Adjusted earnings are expected in the range of $14.25-$16.00.
Adjusted R&D expense is expected in the range of $2.2 billion to $2.3 billion.
However, the company anticipates a decrease in adjusted SG&A costs in 2022 to reflect the favorable impact of the initial implementation of the new cost-reduction measures. It now expects adjusted SG&A to be between $2.3 billion and $2.4 billion, compared with $2.5 billion and $2.6 billion previously.
The reduction in revenues from Tecfidera and Rituxan, both high-margin products, as well as Aduhelm inventory write-offs are expected to reduce Biogen’s gross margin percentage in 2022.
Biogen expects currency movements to hurt revenues in 2022 by approximately $120 million.
Image: Shutterstock
Biogen (BIIB) Q1 Earnings Miss, Aduhelm Setback Leads to Rejig
Biogen (BIIB - Free Report) reported first-quarter 2022 earnings per share (EPS) of $3.62, which missed the Zacks Consensus Estimate of $4.41. In the year-ago quarter, Biogen had recorded earnings of $5.41 per share.
The EPS was hurt by 76 cents during the first quarter of 2022, reflecting the impact of the write-off of its Alzheimer’s disease drug, Aduhelm inventory. The final national coverage determination released by the Centers for Medicare & Medicaid Services last month for amyloid-beta targeting therapies for the treatment of AD effectively denied all Medicare beneficiaries access to Aduhelm. Biogen has decided to substantially eliminate its infrastructure supporting the commercialization of Aduhelm, retaining minimal resources.
Sales came in at $2.52 billion, down 6% reportedly (5% on a constant currency basis) from the year-ago quarter, hurt by continued lower sales of its key drugs. Sales marginally beat the Zacks Consensus Estimate of $2.50 billion.
Biogen’s stock has declined 13.6% this year so far compared with a decrease of 21.4% for the industry.
Image Source: Zacks Investment Research
Product sales in the quarter were $2.1 billion, down 6.6% year over year. Royalties on sales of Roche’s (RHHBY - Free Report) Ocrevus were $252.3 million in the quarter, up 20.5% year over year. Biogen receives royalties on U.S. sales of Roche’s MS drug, Ocrevus.
Revenues from Biogen’s share of Roche’s drugs, Rituxan and Gazyva declined 18% from the year-ago period to $147 million due to biosimilar competition. Other revenues declined 29.2% in the quarter to $66.1 million.
Multiple Sclerosis Revenues
Biogen’s MS revenues were $1.65 billion in the reporter quarter, including Ocrevus royalties, which declined 3% reportedly (2% on a constant currency basis) year over year.
Tecfidera sales declined 14.5% to $409.9 million in the quarter as multiple generic products have been launched in the United States. Biogen expects entry of generics for the drug in European markets during the second quarter, which will likely hurt the sales further.
New drug Vumerity recorded $128 million in sales, higher than $124.9 million in the previous quarter. Sales of the drug gained 73.9% year over year.
Tysabri sales rose 3.5% year over year to $520.8 million.
Combined interferon revenues (Avonex and Plegridy) in the quarter were $309.6 million, down 22.7% year over year.
Other Products
Sales of spinal muscular atrophy (SMA) drug Spinraza declined 9% (6% on a constant currency basis) year over year to $472.5 million.
In the quarter, biosimilars revenues decreased 5% year over year (1% in constant currency) to $194.3 million.
Biogen markets three anti-TNF biosimilars in Europe — Flixabi (a biosimilar referencing Remicade), Benepali (a biosimilar referencing Enbrel) and Imraldi (a biosimilar referencing Humira) through Samsung Bioepis, the joint venture with its South Korean partner, Samsung Biologics. Last month, Biogen completed its equity stake sale in the joint venture to Samsung Bioepis for a payment of up to $2.3 billion. Biogen recorded a payment of $1 billion in cash as part of the sale upon closing.
New Alzheimer’s drug, Aduhelm, approved in June 2021, recorded sales of $2.8 million in the first quarter, compared with $1.0 million in the previous quarter. Sales of the drug are likely to be minimal going forward as the company significantly reduces commercial infrastructure. The company will provide resources only to manage patient access programs, including a continued free drug program for patients currently on treatment in the United States.
Research and development (R&D) expenses were $551.7 million, up 7.4% year over year. Selling, general and administrative (SG&A) expenses gained 6.7% year over year to $634.9 million.
Restructuring Initiatives
Following the failure of Aduhelm commercialization, Biogen announced a set of near-term operational priorities to drive renewed growth and value creation over time. The initiatives are also believed to result in significant cost savings annually.
The company’s substantial elimination of global commercial infrastructure supporting Aduhelm, along with other new cost reductions, is estimated to result in annualized cost savings of approximately $500 million. Existing cost-saving initiatives are also targeting another $500 million in annualized savings.
Biogen is also planning to focus on R&D activities with the highest probability of success. The company can accelerate, terminate, divest, or partner certain programs as well as it continues to evaluate new internal and external opportunities within its therapeutic areas of focus and adjacencies. The company is planning to prioritize its R&D activities based on data from two late-stage studies evaluating another AD candidate, lecanemab, and a depression disorder candidate, zuranolone, expected later this year. Biogen is developing zuranolone in partnership with Sage Therapeutics (SAGE - Free Report) .
Biogen has also initiated a rolling submission of new drug applications to the FDA seeking approval for lecanemab and SAGE’s zuranolone for treating early AD and major depressive disorder, respectively. Biogen and Sage announced data from a late-stage study in February that demonstrated a rapid and statistically significant reduction in depressive symptoms following treatment with zuranolone.
The company plans to focus more on emerging international markets, especially China and certain markets in both Latin America and the Middle East, to boost growth. It is also depending on its newly-approved biosimilar drug, Byooviz (referencing Lucentis), and other four biosimilar candidates to drive revenues of its biosimilar segment.
Biogen’s initiatives also include the deployment of savings from cost-reduction initiatives as well as its existing cash resources toward strategic initiatives to drive top-line growth as well as to provide returns through share repurchases. The company has $2.8 billion authorized for share repurchase. It plans to use part of the authorized amount for repurchases through the end of 2022.
2022 Guidance Maintained
The company reiterated its guidance for total revenues as well as earnings for 2022.
Total revenues are expected in the range of $9.7-$10.0 billion in 2022. The company expects continued erosion of Tecfidera’s sales in the United States. Generic versions of Tecfidera are also expected to be launched in the EU in the first half of 2022. The launch of generics will erode the drug’s ex-U.S. sales. The guidance also assumes significant erosion of Rituxan in the United States. The guidance also reflects the write-off of Aduhelm inventory.
Adjusted earnings are expected in the range of $14.25-$16.00.
Adjusted R&D expense is expected in the range of $2.2 billion to $2.3 billion.
However, the company anticipates a decrease in adjusted SG&A costs in 2022 to reflect the favorable impact of the initial implementation of the new cost-reduction measures. It now expects adjusted SG&A to be between $2.3 billion and $2.4 billion, compared with $2.5 billion and $2.6 billion previously.
The reduction in revenues from Tecfidera and Rituxan, both high-margin products, as well as Aduhelm inventory write-offs are expected to reduce Biogen’s gross margin percentage in 2022.
Biogen expects currency movements to hurt revenues in 2022 by approximately $120 million.
Biogen Inc. Price, Consensus and EPS Surprise
Biogen Inc. price-consensus-eps-surprise-chart | Biogen Inc. Quote
Zacks Rank & Stock to Consider
Biogen has a Zacks Rank #3 (Hold) currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Vertex Pharmaceuticals (VRTX - Free Report) is a better-ranked stock from the same industry, carrying a Zacks Rank #2 (Buy).
Vertex’s stock has surged 19.3% so far this year. Estimates for Vertex’s 2022 earnings have gone up from $14.52 to $14.56 over the past 60 days.
Vertex topped earnings estimates in each of the last four quarters. Vertex has a four-quarter earnings surprise of 10.01%, on average.