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Biogen (BIIB) Beats on Q3 Earnings & Sales, Raises 2022 Outlook

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Biogen (BIIB - Free Report) reported third-quarter 2022 adjusted earnings per share (EPS) of $4.77, beating the Zacks Consensus Estimate of $4.13 and our model estimate of $4.30. In the year-ago quarter, Biogen had recorded earnings of $4.77 per share.

Sales came in at $2.51 billion, down 10% on a reported basis (8% on a constant-currency basis) from the year-ago quarter, hurt by lower sales of Tecfidera. Sales, however, beat the Zacks Consensus Estimate and our estimates of $2.47 billion and $2.4 billion, respectively.

Product sales in the quarter were $1.96 billion, down 11.0% year over year. Royalties on sales of Roche’s (RHHBY - Free Report) Ocrevus were $281.9 million in the quarter, up 6.4% year over year. Revenues from Biogen’s share of Roche’s drugs, Rituxan and Gazyva declined 10.2% from the year-ago period to $135.8 million due to biosimilar competition for Rituxan. Other revenues declined 17.9% in the quarter to $129.5 million.

Multiple Sclerosis Revenues

Biogen’s MS revenues were $1.62 billion in the reporter quarter, including Roche-partnered Ocrevus royalties, which declined 11% on a reported basis and 9% on a constant currency basis year over year. The reported revenue figures beat our model’s estimate of $1.60 billion.

Tecfidera sales declined 32.0% to $339.0 million in the quarter as multiple generic products have been launched in the United States. U.S. Tecfidera revenues declined 48.4% to $92.5 million. Outside U.S. revenues fell 22.8% to $246.5 million, hurt by pricing pressure. Biogen expects the entry of generics to hurt the drug’s global sales going forward.

New drug Vumerity recorded $137.8 million in sales, up 14.0% year over year. Our estimate for Vumerity stood at $147 million.

Total Fumarates (Tecfidera + Vumerity) revenues were $476.8 million in the quarter, down 23.0% year over year.

Tysabri sales declined 3.3% year over year to $505.5 million. Our estimate for the drug was pegged at $509.6 million.

Combined interferon revenues (Avonex and Plegridy) in the quarter were $336.0 million, down 13.3% year over year.

Other Products

Sales of the spinal muscular atrophy (SMA) drug Spinraza declined 3% year over year to $431.1 million due to a decrease in demand as a result of increased competition. Our estimate for the drug was pegged at $444.2 million. On a constant currency basis, sales rose 2% in the quarter.

In the quarter, biosimilars revenues decreased 7% year over year (4% in constant currency) to $188 million.

Aduhelm recorded sales of $1.6 million in the third quarter, compared with $0.1 million in the previous quarter. Following the Centers for Medicare & Medicaid Services’ (“CMS”) final National Coverage Determination (NCD) decision for FDA-approved anti-amyloid antibodies like Aduhelm, Medicare will cover FDA-approved drugs like Aduhelm only for patients enrolled in CMS-approved studies. This NCD decision has also induced Biogen to substantially wind down commercial operations for Aduhelm and retain only minimal resources to manage patients’ access programs.

Research and development (R&D) expenses were $549.2 million, down 21.8% year over year. Adjusted selling, general and administrative (SG&A) expenses declined 13.7% year over year to $561.8 million.

2022 Guidance Increased

The company raised its previously issued total revenues as well as adjusted earnings guidance for 2022.

Total revenues are now expected in the range of $10.0 to $10.15 billion in 2022, up from $9.9-$10.1 billion expected previously. The company, however, expects continued erosion of Tecfidera and Rituxan sales due to generic competition.

Adjusted earnings are expected in the range of $16.50 to $17.15, up from the prior expectation of $15.25-$16.75.

Per management, a better-than-expected sales performance and cost savings prompted the guidance increase. Following the failure of Aduhelm, Biogen announced a set of near-term operational priorities to drive renewed growth and value creation over time. These initiatives are leading to significant cost savings. Following the guidance increase, shares rose 1.3% in pre-market trading.

Biogen’s stock has risen 14.5% this year against a decline of 26.2% for the industry.

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Adjusted R&D expense is expected in the range of $2.2 billion to $2.3 billion, the same as previous expectations. Adjusted SG&A is expected to be between $2.3 billion and $2.4 billion, unchanged from the previous expectations.

The adjusted tax rate is expected to be between 15.5% and 16.5%.

Our Take

Though Biogen beat estimates on both counts, it continues to facemultiple challenges, like generic erosion of Tecfidera, competitive pressure for Spinraza, a declining profit share from Rituxan in the United States and Aduhelm’s failure.

However, Biogen’s potential new product launches such as lecanemab, tofersen, zuranolone and additional biosimilars could help revive growth. Regulatory filings on most of these candidates have already been initiated by Biogen and decisions are expected next year.

Last month, Biogen and its partner Eisai announced that their large phase III confirmatory study, Clarity AD, on anti-amyloid beta protofibril antibody candidate lecanemab to treat early Alzheimer’s disease (AD), has met the primary endpoint and all key secondary endpoints with highly statistically significant result. The study showed that treatment with lecanemab in the early stages of Alzheimer’s disease reduces the rate of clinical decline by 27% compared to placebo.

The Clarity AD study data readout was an important catalyst for Biogen’s stock amid its multiple challenges.

Biogen/Eisai have already filed their biologics license application (“BLA”), seeking accelerated approval for lecanemab with the FDA. The BLA was supported by data from a phase II study (Study 201). The FDA has accepted the BLA and granted priority review to the same. The FDA’s decision is expected on Jan 6, 2023. Eisai plans to file for traditional approval of lecanemab in the United States and submit regulatory applications in the EU and Japan by the end of the first quarter of 2023.


Zacks Rank & Other Stocks to Consider

Biogen currently has a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the overall healthcare sector include Codiak BioSciences and Morphic (MORF - Free Report) , each of which sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, estimates for Codiak BioSciences’ 2022 loss per share have narrowed from $1.94 to $1.81. During the same period, the loss estimates per share for 2023 have narrowed from $2.14 to $1.53. Shares of Codiak BioSciences have lost 94.3% in the year-to-date period.

Earnings of Codiak BioSciences beat estimates in three of the last four quarters and missed the mark just once, witnessing a surprise of 35.40% on average. In the last reported quarter, CDAK delivered an earnings surprise of 61.54%.

In the past 60 days, estimates for Morphic’s 2023 loss per share have narrowed from $3.77 to $3.61 during the same period. Shares of Morphic have lost 47.7% in the year-to-date period.

Earnings of Morphic beat estimates in three of the last four quarters and missed the mark just once, witnessing a surprise of 48.29%, on average. In the last reported quarter, MORF delivered an earnings surprise of 183.95%.

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