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Biogen: Will it Miss Earnings Again?

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We expect Biogen Idec, Inc. (BIIB - Free Report) to report lower-than-expected earnings when it releases its first-quarter 2013 results before the opening bell on Apr 25. We note that Biogen had missed earnings estimate in the previous quarter too, with a negative earnings surprise of 4.11%.

Factors to Consider this Quarter

Biogen’s fourth quarter 2012 results were hurt by higher expenses.  Moreover, results were adversely affected by a correction in the accounting for taxes on capitalized interest at Biogen’s Denmark facility. The correction increased fourth quarter 2012 tax expense by $29 million and reduced earnings by 12 cents.

We expect operating expenses to remain high in the first quarter as the company continues to invest in its pipeline. Though positive on the US approval of Biogen’s oral multiple sclerosis (MS) treatment, Tecfidera, we note that it is the third oral MS product to reach the market. Consequently, Biogen’s sales force has its task cut out as patients and physicians will have to be convinced to switch over to Tecfidera. Slower-than-expected ramp up of Tecfidera could adversely impact Biogen’s results.

Earnings Whispers

Our proven model does not conclusively show that Biogen is likely to beat the Zacks Consensus Estimate in the first quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1 (Strong Buy) or at least Zacks Rank #2 (Buy) or Zacks Rank #3 (Hold) for this to happen. Unfortunately this is not the case here as elaborated below.

Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.55 while the Zacks Consensus is higher at $1.57. This results in a difference of -1.27%.
Zacks Rank #3 (Hold): Biogen’s Zacks Rank of 3 complicates the predictive power of ESP. That said we need to have a positive ESP to be confident of an earnings surprise call.

Stocks to Consider

Here are some companies you may want to consider on the basis of our model which shows that they have the right combination of elements to post an earnings beat this quarter:

Eli Lilly and Company (LLY) has an Earnings ESP of +3.85% and holds a Zacks Rank #3 (Hold).

Gilead Sciences Inc. (GILD - Free Report) has an Earnings ESP of +2.08% and carries a Zacks Rank #3.

VIVUS Inc. (VVUS - Free Report) has an Earnings ESP of +11.77% and carries a Zacks Rank #3.

In-Depth Zacks Research for the Tickers Above

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VIVUS, Inc. (VVUS) - free report >>

Eli Lilly and Company (LLY) - free report >>

Gilead Sciences, Inc. (GILD) - free report >>

Biogen Inc. (BIIB) - free report >>

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