Biogen (BIIB) Down 17.2% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Biogen Inc. (NASDAQ:BIIB) . Shares have lost about 17.2% in the past month, underperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is BIIB 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 catalysts.

Biogen Tops Sales in Q4, Misses Earnings

Fourth-quarter 2017 earnings per share were $5.26, which missed the Zacks Consensus Estimate of $5.44 by 3.3%. Earnings however rose 4% year over year as higher revenues made up for higher operating costs.

Sales came in at $3.31 billion, up 15% from the year-ago period. Sales also surpassed the Zacks Consensus Estimate of $3.07 billion by 7.6%.

Higher MS sales and Spinraza outperformance led to the strong top-line performance in the quarter. Sales in the quarter also benefited from $40 million in inventory build and increased contract manufacturing (other revenues).

The top line, excluding hemophilia revenues, grew 26% year over year.

Quarter in Detail

Biogen’s MS revenues were $2.3 billion (up 5%) in the quarter including approximately $77 million in royalties on the sales of Roche’s MS drug Ocrevus.

Tecfidera’s sales increased 7% year over year and 1% sequentially to $1.08 billion. This included the U.S. sales of $831.6 million (up 4% year over year) and ex-U.S. sales of $244 million (up 20.6%).

Patient growth across major European markets and strong emerging market growth drove international Tecfidera sales while a $20 million inventory build in the quarter benefited U.S. sales.

Fourth-quarter Tysabri revenues were $463 million which decreased 2% year over year and 1% sequentially.

Tysabri U.S. sales declined 13% to $252.1 million in the quarter. Biogen said that since Ocrevus launch, it has witnessed a decrease in the number of patient starts and an increase in discontinuation of Tysabri in the United States. International revenues rose 14% to $210.6 million in the quarter helped by a large order in Russia and patient growth in all major European countries following the label update in 2017.

Combined interferon revenues (Avonex and Plegridy) in the fourth quarter were $645 million, down 6% from the year-ago period. Avonex revenues declined 8% from the year-ago period to $520 million. Plegridy contributed $125 million to fourth-quarter 2017 revenues, flat year over year as well as 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 $12 million to revenues in the fourth quarter compared with $14 million in third-quarter 2017.

Newly launched Spinraza brought in revenues of $363 million in the fourth quarter, registering growth of 34% sequentially. As expected, Spinraza sales in the fourth quarter were mainly driven by ex-U.S. markets.

Spinraza U.S. sales were $218 million in the fourth quarter, slightly better than $198 million in the third quarter. Biogen said that 25% of U.S. sales in the fourth quarter were from patients who receive less intensive maintenance doses (dosing only once/4 months), versus 10% in the third quarter.

According to Biogen, 50% of Spinraza revenues will be derived from maintenance dosing by the end of 2018, which will help stabilize the growth trajectory.

However, Biogen said the number of patients on therapy in the United States rose 33% from the third quarter.

In ex-U.S. markets, Spinraza recorded sales of $144 million, significantly higher than $73.3 million in the third quarter as it almost doubled the number of commercial patients on therapy. The company said that Germany, Turkey, and Japan accounted for over two-thirds of ex-U.S. revenues.

In the quarter, Biogen recorded biosimilar revenues of $122 million compared with $101 million in the third quarter, driven primarily by Benepali, which recorded revenues of $117.6 million, up 18.5% sequentially on increase in market share. Flixabi recorded revenues of $4.3 million compared with $2.2 million in the third quarter.

Revenues from Anti-CD20 therapeutic programs, which include Biogen’s shares of Rituxan and Gazyva operating profits, climbed 6% from the year-ago period to $338 million.

As expected, operating expenses were higher in the fourth quarter as the company continues to invest in its strategic priorities. R&D spend rose 11% year over year and 32% sequentially to $588 million, while SG&A spend rose 15% year over year and 28% sequentially to $554 million.

2017 Results

Full-year 2017 sales of $12.27 billion topped the Zacks Consensus Estimate of $12.04 billion. Sales rose 7% year over year. The top line, excluding hemophilia revenues, grew 15% year over year.

Adjusted earnings for 2017 were $21.81 per share, falling short of the Zacks Consensus Estimate of $21.98. Earnings rose 8% year over year.

2018 Outlook

Biogen guided earnings in the range of $24.20 and $25.20 per share, representing growth of 11% to 16%. Revenues are expected in the range of $12.7-$13.0 billion in 2018, representing year-over-year growth of 3.5% to 6%.

In 2018, Biogen said its MS franchise’s sales growth, including Ocrevus royalties, will be roughly flat from 2017 levels. Excluding Ocrevus royalties, MS sales are expected to decline in a low single-digit range. As far as Spinraza is concerned, in 2018, a significant portion of the revenue growth is expected to come from outside the United States.

While R&D expenses are expected to be approximately 16% to 17% of total revenues in 2018, SG&A is expected in the range of 15% to 16%, both lower than 2017 levels.

First Quarter 2018 Outlook

On the call, the company said that seasonality and absence of inventory build (that benefitted fourth quarter 2017 results) will hurt the performance of its MS franchise in first quarter.

Meanwhile, operating expenses are expected to be lower in the first quarter of 2018 compared with the fourth quarter of 2017. However, earnings growth is expected to be higher in the second and fourth quarters of the year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. While looking back an additional 30 days, we can see even more upward momentum. There have been ten moves higher compared to five lower two months ago.

Biogen Inc. Price and Consensus

Biogen Inc. Price and Consensus | Biogen Inc. Quote

VGM Scores

At this time, BIIB has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was also 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 equally suitable for value, growth and momentum investors.

Outlook

BIIB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.