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Biogen (BIIB) Q3 Earnings Coming Up: What's in the Cards?

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Biogen Inc. (BIIB - Free Report) will report third-quarter 2018 results on Oct 23, before market open. Last quarter, the company delivered a positive earnings surprise of 11.11%.

Biogen’s shares have risen 3.6% this year so far against the industry’s decline of 13.2% in the same time frame.

 

Biogen’s earnings performance has been decent so far. The company delivered a positive surprise in three of the last four quarters. The average earnings beat over the last four quarters is 5.13%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

In the second quarter of 2018, performance of Biogen’s multiple sclerosis ("MS") drugs improved compared to the first quarter of the year as patient growth in international markets offset decline in the United States due to competitive pressure from Roche’s (RHHBY - Free Report) newly launched MS drug, Ocrevus. U.S. MS sales should continue to remain soft in the third quarter.

International MS sales should remain strong in the third quarter supported by patient growth of Tecfidera across major European markets and strong emerging market growth. However, on the second-quarter conference call, management had warned that pricing pressure in some European markets can hurt Tecfidera sales.

The Zacks Consensus Estimate for sales of Tecfidera in the third quarter is pegged at $1.11 billion while that for Tysabri (Global In-Market sales) is $449 million.

Meanwhile, the combined number of patients using Avonex and Plegridy will continue to decline with patients transitioning to other oral MS therapies as well as due to higher discounts and allowance.

Biogen’s new drug, Spinraza, approved for spinal muscular atrophy, saw strong sales performance in the second quarter driven by sales outside the United States. U.S. Spinraza sales improved sequentially in the second quarter. On the second-quarter call, management had said 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 had till then penetrated only 10% of the adult segment and thus this segment represents a growth opportunity. In ex-U.S. markets, management had said that Spinraza’s uptake will continue to be driven by expansion into new regions. This makes us believe that the strong sales trend should continue for Spinraza in the third quarter.

Biogen markets two biosimilar products — Flixabi (a biosimilar referencing Remicade) and Benepali (a biosimilar referencing Enbrel). On the second-quarter call, management had warned that in the second half, growth of biosimilars sales will moderate as volume growth will be offset by pricing pressure.

Revenues from Biogen’s anti-CD20 therapeutic programs, which include Biogen’s shares of Rituxan and Gazyva operating profits, was a key contributor to the top line in the second quarter primarily driven by Ocrevus royalties. We expect the positive trend to continue.

Research and development costs are expected to be higher due to business development deals done in the first half of the year.

Earnings Whispers

Our proven model does not conclusively show that Biogen is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at $6.79. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Biogen’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

 

Stocks to Consider

Here are some large biotech stocks that have the right combination of elements to beat on earnings this time around:

Amgen, Inc. (AMGN - Free Report) has an Earnings ESP of +0.56% and a Zacks Rank #2. The company is slated to release results on Oct 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Menlo Therapeutics Inc. (MNLO - Free Report) has an Earnings ESP of +3.57% and a Zacks Rank #2. The company is expected to release results on Nov 7.

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Roche Holding AG (RHHBY) - free report >>

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Biogen Inc. (BIIB) - free report >>

Menlo Therapeutics Inc. (MNLO) - free report >>

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