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Will MS Franchise Sales Boost Biogen's (BIIB) 1Q Earnings?

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Biogen Inc. (BIIB - Free Report) , a well-known name in the multiple sclerosis (MS) market, will be reporting first quarter 2016 earnings results on Apr 21, before the market opens.

Biogen’s performance has been mostly positive with the company surpassing expectations in three of the last four quarters. The average earnings surprise over the last four quarters is +7.23%.

Let’s see how things are shaping up for the first quarter.

Will Tecfidera Sales Continue with Sequential Improvement?

Since the emergence of the first progressive multifocal leukoencephalopathy (PML)-related death in a patient on oral MS drug, Tecfidera, investor focus has remained on the performance of the drug.

Tecfidera sales grew 6% on a sequential basis in the fourth quarter though U.S. sales were positively impacted by an increase in inventory (approximately $30 million). Biogen is working on growing Tecfidera sales and is pursuing commercial initiatives including new direct to consumer marketing programs.

Tecfidera demand is expected to remain relatively stable in the U.S. While the company expects its recently launched marketing campaign to reaccelerate growth, the impact cannot be determined until the second quarter of the year. Biogen expects constant pricing in Europe and continued patient growth, particularly in recently launched markets.

Tysabri should remain on a stable trajectory. Meanwhile, the number of patients using Avonex and Plegridy combined will continue to decline as patients move toward oral treatments.

Eloctate is expected to continue growing as a significant portion of the patient population that can benefit from long-acting therapies is yet to be treated. Alprolix patient adds are expected to moderate given the rapid uptake and penetration so far.

Biogen also expects its profit share for Rituxan and Gazyva to decline on FDA approval for Gazyva for Rituxan-refectory indolent non-Hodgkin's lymphoma.

Biogen does not expect any price increases for Avonex, Plegridy, and Tecfidera in the U.S. for the remainder of the year.

Meanwhile, the company expects the head count reduction and restructuring initiative announced in October to benefit operating expenses by about $250 million this year. Biogen also intends to reduce targeted fees and services expenses, which are largely reflected in SG&A.

Focus on Call: Investor focus on the first quarter call will remain on Tecfidera’s scrip trends, news regarding additional PML cases, whether the company is planning to divest the hemophilia business and if there is any new share buyback program on the cards.

What Our Model Indicates

Our proven model shows that Biogen is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.90%.

This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.

The combination of Biogen’s Zacks Rank #3 and +0.90% ESP makes us very confident in looking for a positive earnings beat on Apr 21.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Amgen Inc. (AMGN - Free Report) has an Earnings ESP of +7.81% and carries a Zacks Rank #3. It will be reporting results on Apr 28.

The Earnings ESP for BioMarin Pharmaceutical Inc. (BMRN - Free Report) is +18.48% and it carries a Zacks Rank #3. The company will release results on Apr 28.

The Earnings ESP for Gilead Sciences Inc. (GILD - Free Report) is +1.65% and it carries a Zacks Rank #1 (Strong Buy). The company will release results on Apr 28.

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