Credit: Shutterstock photoIt has been about a month since the last earnings report for Biogen Inc.BIIB . Shares have lost about 9.5% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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 Beats on First-Quarter Earnings & Sales
Biogen reported better-than-expected results in the first-quarter of 2017. The company surpassed expectations both for earnings and sales.
First-quarter 2017 earnings per share were $5.20, which beat the Zacks Consensus Estimate of $4.97 by 4.6%. Earnings also improved 9% year over year.
In the first quarter, Biogen booked a charge of $1.22 per share related to the settlement and license with Forward Pharma in the U.S. PTO ruling in favor of Biogen in the interference proceeding. Including this, and other charges and special items, reported earnings were $3.46 per share, down 22% year over year.
Sales came in at $2.81 billion, up 3% from the year-ago period. Sales also surpassed the Zacks Consensus Estimate of $2.73 billion by 3.2%. Sales, excluding hemophilia revenues, grew 8% backed by better-than expected sales of Spinraza and a one-time revenue recognition for Tysabri.
Quarter in Detail
Biogen's MS revenues grew 3% year over year in the first quarter of 2017 with stable global share.
Tecfidera sales rose 1% from the year-ago period to $958.2 million. However, the drug recorded a 4.4% sequential decline in revenues. This included U.S. sales of $751.1 million and ex-U.S. sales of $207.1 million. In the U.S., Tecfidera revenues were hurt by approximately $50 million - $60 million due to lower inventory levels at the specialty pharmacies.
Management said that while demand trends in the U.S. remains stable, Tecfidera continues to see patient growth in ex-U.S. markets.
Biogen expects relatively stable demand for both Tecfidera and Tysabri in 2017 as patient growth in ex-U.S. markets offsets the modest decline in the U.S. due to rising competition including from Ocrevus.
First-quarter Tysabri revenues increased 14% year over year and 15% sequentially to $545 million (U.S. $305.5 million, ex-U.S. $239.5 million) backed by continued trend of positive patient growth in both U.S. and international markets.
Ex-U.S. Tysabri revenues benefited by approximately $45 million due to an agreement with the Price and Reimbursement Committee of the Italian National Medicines Agency related to prior periods.
Combined interferon revenues (Avonex and Plegridy) in the first quarter were $648.3 million (U.S. $464.8 million, ex-U.S. $183.5 million), down 3.3% from the year-ago period and 5.8% sequentially. Avonex revenues declined 5% from the year-ago period to $537 million. Plegridy contributed $112 million to first-quarter 2017 revenues, up 5% year over year but down 10% sequentially.
U.S. Interferon revenues are experiencing declining trends due to patients transitioning to other oral MS therapies as well as higher discounts and allowance.
Zinbryta, launched in collaboration with AbbVie in the U.S. and Germany in 2016, contributed $10.7 million to revenues in the quarter compared with $5.9 million in fourth-quarter 2016.
Newly launched Spinraza brought revenues of $47.4 million (U.S. revenues $46 million) in the first quarter compared with $4.6 million in fourth-quarter 2016. The company said that Spinraza is off to a promising start backed by robust underlying demand and inventory build (less than $10 million). The company is working on expanding access to all patients.
Though Biogen experienced some progress in terms of both infrastructure and payer reimbursements in the quarter, it continued to warn of possible logistics and coverage restriction on the drug in the U.S. as well as other markets.
With positive CHMP opinion in April recommending a broad indication, management said it is ramping up pre-launch activities in Europe. The company plans to file regulatory/marketing applications in at least 10 additional countries throughout 2017
In the quarter, Biogen recorded biosimilar revenues of $66 million, up from $53 million in the fourth quarter driven primarily by Benepali. In the quarter, the company said it saw growing market share of Benepali particularly in Germany, the UK, and Sweden.
Revenues from Anti-CD20 therapeutic programs, which include Biogen's share of Rituxan and Gazyva operating profits, increased 3% from the year-ago period to $341.0 million in the first quarter.
R&D spend rose 4% in the reported quarter to $421 million while SG&A spend increased 3% year over year to $483 million.
In the quarter, the company repurchased 2 million shares worth $584 million under its Jul 2016 $5.0 billion share repurchase program. Subsequent to quarter end, the company repurchased another approximately 2 million shares for a total value of $543 million.
2017 Outlook
The company did not provide any update on its 2017 outlook at the first-quarter conference call. Management said they will update their financial guidance at the second quarter conference call. However, it did mention that $360 million in payments associated with the tau antibody BMS-986168 acquisition exceeds the previous guidance for business development payments of $100 million, which should result in higher R&D expenses than previously guided.
Meanwhile, we believe the recent Ocrevus launch by Roche may have a negative impact on its MS franchise.
Earlier at the 2016 conference call, Biogen had issued its 2017 outlook. Biogen then said it expects earnings in the range of $20.45 to $21.25 per share. Revenues are expected in a range of $11.1 billion to $11.4 billion in 2017. The guidance includes one month of contribution from the hemophilia business (equating to approximately $75 million).
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to 16 lower. In the past month, the consensus estimate has declined 13.3% due to these changes.
Biogen Inc. Price and Consensus
Biogen Inc. Price and Consensus | Biogen Inc. Quote
VGM Scores
At this time, Biogen's stock has an average Growth Score of 'C', 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.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. The stock has a Zacks Rank #3 (Hold). We are expecting an in-line return from the stock in the next few months.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
