It has been about a month since the last earnings report for Biogen Inc. (BIIB - Free Report) . Shares have added about 6.7% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is BIIB due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Biogen Tops Earnings in Q1, Misses Sales
First-quarter 2018 earnings per share were $6.05, which beat the Zacks Consensus Estimate of $5.93 by 2%. Earnings rose 16% year over year backed by lower-than-expected costs and lower tax rates.
Sales came in at $3.13 billion, up 11% from the year-ago period. However, sales marginally missed the Zacks Consensus Estimate of $3.15 billion.
Revenue growth was principally driven by Spinraza growth in international markets, biosimilars and Other Revenues of $164 million. The performance of the MS franchise and Spinraza in the United States was soft in the quarter.
The top line, excluding hemophilia revenues, grew 15% year over year.
Quarter in Detail
Biogen’s multiple sclerosis (MS) revenues were $2.1 billion in the reporter quarter including approximately $77 million in royalties on the sales of Roche’s MS drug Ocrevus. MS revenues declined 4% year over year and 8% sequentially.
As expected, competition from Ocrevus, seasonality and a larger-than-expected inventory drawdown in the United States, hurt the performance of Biogen’s MS franchise in first quarter.
However, on the call, the company said that demand for its MS products in the United States improved in the quarter and discontinuations remained relatively stable. In International markets it saw strong progress in the emerging markets.
Tecfidera’s sales increased 3% year over year to $987 million. However, Tecfidera sales declined 8% sequentially. This included U.S. sales of $728.9 million (down 3% year over year) and ex-U.S. sales of $258 million (up 24.6%).
In the United States, Tecfidera sales were affected by about $80 million in inventory drawdown compared with a drawdown of approximately $60 million in the first quarter of last year. Excluding this impact, U.S. Tecfidera revenues would have been flat year over year with Tecfidera price increases offsetting the impact of Ocrevus. Meanwhile, patient growth across major European markets and strong emerging market growth drove international Tecfidera sales. Positive impact of currency also benefited international growth.
Tysabri’s sales declined 15% year over year but were flat sequentially at $462 million.
Tysabri U.S. sales declined 18.3% to $249.7 million in the quarter hurt by Ocrevus launch and seasonality and inventory dynamics. International revenues declined 11.3% to $212.4 million in the quarter due to recognition of $45 million of previously deferred revenues in the prior-year period, which was absent in the first quarter of 2018.
Combined interferon revenues (Avonex and Plegridy) in the first quarter were $550 million, down 15% both year over year and sequentially. Avonex revenues declined 16% from the year-ago period to $451 million. Plegridy contributed $100 million to revenues, which decreased 11% year over year and 20%, sequentially.
U.S. Interferon revenues are experiencing declining trends due to patients transitioning to other oral or high efficacy MS therapies as well as due to higher discounts and allowance.
Zinbryta, launched in collaboration with AbbVie, contributed $1 million to revenues in the first quarter compared with $12 million in fourth-quarter 2017.
Spinraza registered revenues of $364 million in the first quarter, almost in line with the previous quarter as strong international growth was offset by a moderating performance in the United States.
As expected, Spinraza sales in the quarter were mainly driven by ex-U.S. markets.
Spinraza U.S. sales were $188 million in the first quarter, decreasing 13.8% sequentially due to lower- than-expected uptake in the adult segment. However, in the ex-U.S. markets, Spinraza recorded sales of $176 million, up 22% sequentially. The company said that Spinraza international revenues were mainly grossed from Germany, Turkey and Japan.
However, Biogen highlighted on the call that overall patient numbers grew in the quarter. The number of patients on Spinraza grew approximately 16% in the United States and 56% outside the United States in the quarter.
Biogen said that 40% of U.S. sales in the first quarter were from patients who receive less intensive maintenance doses (dosing only once/4 months) versus 25% in the previous quarter.
On the call, management said that growth in Spinraza U.S sales will be flat for at least the next two quarters, given the continued transition of patients from the loading phase to the less intensive maintenance phase.
Management is optimistic that patient starts will grow in the U.S. markets as it captures the under-penetrated adult segment while the ex-U.S. expansion will continue.
In the first quarter of 2018, Biogen recorded biosimilar revenues of $128 million compared with $122 million in the fourth quarter of 2017, driven primarily by Benepali, which recorded revenues of $120.9 million, up 2.8% sequentially on increase in market share. Flixabi recorded revenues of $6.6 million compared with $4.3 million in the previous quarter.
Revenues from Anti-CD20 therapeutic programs, which include Biogen’s shares of Rituxan and Gazyva operating profits, climbed 30.1% from the year-ago period to $443.2 million, primarily driven by Ocrevus royalties as well as a strong performance of Rituxan.
R&D spend increased 18% year over year but decreased 15% sequentially to $497 million due to higher pipeline related costs. On the other hand, while SG&A spend was up 3% year over year, it decreased 10% sequentially to $498 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to 23 lower.
At this time, BIIB has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks style scores indicate that the company's stock is suitable for value and growth investors.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, BIIB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.