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Biogen (BIIB) Down 10.1% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Biogen (BIIB - Free Report) . Shares have lost about 10.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Biogen due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Biogen Tops Earnings & Sales in Q2
Biogen reported second-quarter 2018 earnings per share of $5.80, which beat the Zacks Consensus Estimate of $5.22 by 11.1%. Earnings rose 15.1% year over year backed by higher revenues and lower tax rates.
Earnings in the second quarter excluded certain one-time payments related to some agreements.
Sales came in at $3.36 billion, up 9.1% from the year-ago period. Moreover, sales beat the Zacks Consensus Estimate of $3.25 billion.
Revenue growth was principally driven by higher sales of Spinraza, mainly in outside U.S. markets and higher contribution from the anti-CD20 franchise. Meanwhile, the MS franchise improved from first-quarter levels. Currency boosted revenues by approximately $50 million in the quarter.
Quarter in Detail
Biogen’s multiple sclerosis (MS) revenues were $2.3 billion in the reporter quarter including approximately $113 million in royalties on the sales of Roche’s MS drug, Ocrevus. MS revenues declined 2% year over year but rose 10% sequentially.
In the United States, MS sales were hurt by the launch of Ocrevus and inventory channel dynamics.
The number of patients on Biogen’s MS products globally was flat year over year as patient growth in international markets offset decline in the United States due to competitive pressure. However, management pointed out that new patient starts for Tecfidera in the United States were at the highest level since Ocrevus’ launch last year.
In the second half of 2018, Biogen expects worldwide MS product revenues to be stable from the year-ago period with ex-US growth offsetting modest U.S. volume decline
Tecfidera’s sales decreased 2% year over year to $1.09 billion. This included U.S. sales of $825.8 million (down 5.6% year over year) and ex-U.S. sales of $261 million (up 10.8%). However, Tecfidera sales rose 10% sequentially.
Competition from Ocrevus and an inventory drawdown of approximately $35 million hurt Tecfidera sales in the United States. However, patient growth across each large routine market and solid growth in emerging markets, mainly Japan, drove Tecfidera’s sales increase in ex-U.S. markets.
Biogen expects continued patient growth for Tecfidera in ex-U.S. markets, though pricing pressure in some European markets can hurt sales.
Tysabri’s sales declined 6% year over year to $467 million. Tysabri U.S. sales declined 8.3% to $265.5 million in the quarter hurt by Ocrevus launch. International revenues declined 2.4% to $201.7 million. However, Tysabri’s sales rose 1% sequentially.
Combined interferon revenues (Avonex and Plegridy) in the second quarter were $626 million, down 9% year over year but up 14% sequentially. Avonex revenues declined 10% from the year-ago period to $502 million. Plegridy contributed $124 million to revenues, which decreased 7% year over year.
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 generated no revenues in the quarter as the drug was withdrawn from the market in March 2018 due to growing safety concerns and limited commercial adoption. The drug had contributed $1 million to revenues in the first quarter of 2018 and $16 million in the year-ago quarter.
Spinraza (spinal muscular atrophy) performed exceptionally as sales grew 108% year over year and 16% sequentially to $423 million largely driven by sales outside the United States.
Spinraza U.S. sales were $206 million in the second quarter, increasing 9.6% sequentially. Moreover, in the ex-U.S. markets, Spinraza recorded sales of $217 million, up 23.3% sequentially. Almost 75% of ex-U.S. sales came from Germany, Japan, Italy, Turkey, Brazil, Spain, and Australia in the second quarter.
Overall commercial patients on Spinraza rose 28% in the quarter. The number of patients on Spinraza grew approximately 13% in the United States and 47% outside the United States in the quarter compared to the end of the first quarter.
In the United States, the number of adult patients on Spinraza rose 20% in the quarter with the company capturing the under-penetrated adult segment. Management is optimistic that patient starts will grow in the United States as it continues to capture the adult segment, which represents approximately 60% of all SMA patients. It has till now penetrated only 10% of the adult segment and thus this segment represents a potential growth opportunity. In ex-U.S. markets, Spinraza’s uptake will continue to be driven by expansion into new regions
Biogen said that 55% of U.S. sales in the second quarter were from patients who receive less intensive maintenance doses (dosing only once/4 months) versus 40% in the previous quarter.
In the second quarter of 2018, Biogen recorded biosimilar revenues of $127 million, up 40% year over year but almost flat sequentially.
In the second half, Biogen believes growth of biosimilars sales will moderate as volume growth is offset by pricing pressure. However, with Imraldi (biosimilar Humira) expected to be launched in October 2018, sales should once again pick up in 2019.
Revenues from Anti-CD20 therapeutic programs, which include Biogen’s shares of Rituxan and Gazyva operating profits, increased 23.5% from the year-ago period to $490.4 million primarily driven by Ocrevus royalties.
The R&D spend increased 3% year over year and 64.8% sequentially to $819 million due to higher upfront payment to Ionis pursuant to a collaboration agreement and higher pipeline related costs. SG&A spend was up 19.1% year over year and almost 3% sequentially to $512 million.
Pipeline Update
On the call, the company announced that the FDA has placed a clinical hold on its IND for its SMA gene therapy program, which it is developing in collaboration with the University of Pennsylvania.
Also, the company said it has completed enrollment in ENGAGE and EMERGE, the phase III studies of aducanumab in July.
2018 Outlook Updated
Biogen raised its revenue expectations for the full year to a range of $13.0 - $13.2 billion from the previous expectation of $12.7 - $13 billion. The revenue guidance represents year-over-year growth of approximately 6% to 7.5%
The company also increased its earnings expectation from $24.20 - $25.20 per share to $24.90 - $25.50 per share. The new guidance range represents year-over-year growth of approximately 14% to 17%
Adjusted R&D cost is expected to be approximately 18% to 19% of total revenues, higher than 16% to 17% previously due to business development deals done in the first half of the year. However, SG&A guidance was maintained in the range of 15% to 16% of total revenues.
Adjusted tax rate is expected to be approximately 20.5% to 21.5% versus prior guidance of 22.5% to 23.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.9% due to these changes.
VGM Scores
Currently, Biogen has an average Growth Score of C, however its momentum is doing a lot better with an A. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for value and to a lesser degree growth.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Biogen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Biogen (BIIB) Down 10.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Biogen (BIIB - Free Report) . Shares have lost about 10.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Biogen due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Biogen Tops Earnings & Sales in Q2
Biogen reported second-quarter 2018 earnings per share of $5.80, which beat the Zacks Consensus Estimate of $5.22 by 11.1%. Earnings rose 15.1% year over year backed by higher revenues and lower tax rates.
Earnings in the second quarter excluded certain one-time payments related to some agreements.
Sales came in at $3.36 billion, up 9.1% from the year-ago period. Moreover, sales beat the Zacks Consensus Estimate of $3.25 billion.
Revenue growth was principally driven by higher sales of Spinraza, mainly in outside U.S. markets and higher contribution from the anti-CD20 franchise. Meanwhile, the MS franchise improved from first-quarter levels. Currency boosted revenues by approximately $50 million in the quarter.
Quarter in Detail
Biogen’s multiple sclerosis (MS) revenues were $2.3 billion in the reporter quarter including approximately $113 million in royalties on the sales of Roche’s MS drug, Ocrevus. MS revenues declined 2% year over year but rose 10% sequentially.
In the United States, MS sales were hurt by the launch of Ocrevus and inventory channel dynamics.
The number of patients on Biogen’s MS products globally was flat year over year as patient growth in international markets offset decline in the United States due to competitive pressure. However, management pointed out that new patient starts for Tecfidera in the United States were at the highest level since Ocrevus’ launch last year.
In the second half of 2018, Biogen expects worldwide MS product revenues to be stable from the year-ago period with ex-US growth offsetting modest U.S. volume decline
Tecfidera’s sales decreased 2% year over year to $1.09 billion. This included U.S. sales of $825.8 million (down 5.6% year over year) and ex-U.S. sales of $261 million (up 10.8%). However, Tecfidera sales rose 10% sequentially.
Competition from Ocrevus and an inventory drawdown of approximately $35 million hurt Tecfidera sales in the United States. However, patient growth across each large routine market and solid growth in emerging markets, mainly Japan, drove Tecfidera’s sales increase in ex-U.S. markets.
Biogen expects continued patient growth for Tecfidera in ex-U.S. markets, though pricing pressure in some European markets can hurt sales.
Tysabri’s sales declined 6% year over year to $467 million. Tysabri U.S. sales declined 8.3% to $265.5 million in the quarter hurt by Ocrevus launch. International revenues declined 2.4% to $201.7 million. However, Tysabri’s sales rose 1% sequentially.
Combined interferon revenues (Avonex and Plegridy) in the second quarter were $626 million, down 9% year over year but up 14% sequentially. Avonex revenues declined 10% from the year-ago period to $502 million. Plegridy contributed $124 million to revenues, which decreased 7% year over year.
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 generated no revenues in the quarter as the drug was withdrawn from the market in March 2018 due to growing safety concerns and limited commercial adoption. The drug had contributed $1 million to revenues in the first quarter of 2018 and $16 million in the year-ago quarter.
Spinraza (spinal muscular atrophy) performed exceptionally as sales grew 108% year over year and 16% sequentially to $423 million largely driven by sales outside the United States.
Spinraza U.S. sales were $206 million in the second quarter, increasing 9.6% sequentially. Moreover, in the ex-U.S. markets, Spinraza recorded sales of $217 million, up 23.3% sequentially. Almost 75% of ex-U.S. sales came from Germany, Japan, Italy, Turkey, Brazil, Spain, and Australia in the second quarter.
Overall commercial patients on Spinraza rose 28% in the quarter. The number of patients on Spinraza grew approximately 13% in the United States and 47% outside the United States in the quarter compared to the end of the first quarter.
In the United States, the number of adult patients on Spinraza rose 20% in the quarter with the company capturing the under-penetrated adult segment. Management is optimistic that patient starts will grow in the United States as it continues to capture the adult segment, which represents approximately 60% of all SMA patients. It has till now penetrated only 10% of the adult segment and thus this segment represents a potential growth opportunity. In ex-U.S. markets, Spinraza’s uptake will continue to be driven by expansion into new regions
Biogen said that 55% of U.S. sales in the second quarter were from patients who receive less intensive maintenance doses (dosing only once/4 months) versus 40% in the previous quarter.
In the second quarter of 2018, Biogen recorded biosimilar revenues of $127 million, up 40% year over year but almost flat sequentially.
In the second half, Biogen believes growth of biosimilars sales will moderate as volume growth is offset by pricing pressure. However, with Imraldi (biosimilar Humira) expected to be launched in October 2018, sales should once again pick up in 2019.
Revenues from Anti-CD20 therapeutic programs, which include Biogen’s shares of Rituxan and Gazyva operating profits, increased 23.5% from the year-ago period to $490.4 million primarily driven by Ocrevus royalties.
The R&D spend increased 3% year over year and 64.8% sequentially to $819 million due to higher upfront payment to Ionis pursuant to a collaboration agreement and higher pipeline related costs. SG&A spend was up 19.1% year over year and almost 3% sequentially to $512 million.
Pipeline Update
On the call, the company announced that the FDA has placed a clinical hold on its IND for its SMA gene therapy program, which it is developing in collaboration with the University of Pennsylvania.
Also, the company said it has completed enrollment in ENGAGE and EMERGE, the phase III studies of aducanumab in July.
2018 Outlook Updated
Biogen raised its revenue expectations for the full year to a range of $13.0 - $13.2 billion from the previous expectation of $12.7 - $13 billion. The revenue guidance represents year-over-year growth of approximately 6% to 7.5%
The company also increased its earnings expectation from $24.20 - $25.20 per share to $24.90 - $25.50 per share. The new guidance range represents year-over-year growth of approximately 14% to 17%
Adjusted R&D cost is expected to be approximately 18% to 19% of total revenues, higher than 16% to 17% previously due to business development deals done in the first half of the year. However, SG&A guidance was maintained in the range of 15% to 16% of total revenues.
Adjusted tax rate is expected to be approximately 20.5% to 21.5% versus prior guidance of 22.5% to 23.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.9% due to these changes.
VGM Scores
Currently, Biogen has an average Growth Score of C, however its momentum is doing a lot better with an A. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for value and to a lesser degree growth.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Biogen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.