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Biogen (BIIB) Beats on Q1 Earnings, Spinraza Drives Sales

Zacks Equity Research

Biogen Inc. BIIB reported first-quarter 2019 earnings per share of $6.98, which beat the Zacks Consensus Estimate of $6.84. Earnings rose 15% year over year, backed by higher revenues and a lower share count due to share buybacks in the quarter.

Sales came in at $3.49 billion, up 11% from the year-ago quarter. Sales also beat the Zacks Consensus Estimate of $3.38 billion.

Revenue growth was principally driven by higher sales of Spinraza and higher contribution from biosimilars.

Biogen’s shares have declined 23.5% this year so far against the industry’s increase of 4.2% in the same time frame.

Quarter in Detail

Product sales in the quarter were $2.68 billion, up 6% year over year. Royalties on sales of Roche’s RHHBY MS drug, Ocrevus were $112 million in the quarter, up 46% year over year. Though Ocrevus poses strong competition to Biogen’s MS drugs, the company receives royalties on U.S. sales of Ocrevus from Roche. Revenues from Biogen’s share of Rituxan and Gazyva operating profits increased almost 11% from the year-ago period to $405 million. Other revenues rose 78% in the quarter to $292 million.

Biogen’s multiple sclerosis (MS) revenues were $2.1 billion in the reporter quarter, including Ocrevus royalties. MS revenues were flat year over year. However, excluding Ocrevus royalties, MS revenues declined 2% year over year.  In the first quarter, U.S. MS product revenues were hurt by $175 million of inventory drawdown.

Tecfidera sales rose 1% year over year to $999 million. However, Tecfidera sales declined 10% sequentially in the quarter due to lower U.S. sales. U.S. sales in the quarter were $717.7 million, down 1.5% year over year while ex-U.S. sales were $281.1 million, up 9%.

Tysabri sales were flat year over year and fell 1% sequentially to $460 million. Tysabri U.S. sales declined 1.9% to $245.0 million in the quarter due to lower channel inventory levels. International revenues rose 1.4% to $215.4 million.

Combined interferon revenues (Avonex and Plegridy) in the quarter were $500.9 million, down 9% year over year. Avonex revenues declined 12% from the year-ago quarter to $397 million. Plegridy contributed $104 million to revenues, up 4% year over year.

U.S. Interferon revenues have been declining due to transition of patients to other oral or high efficacy MS therapies as well as higher discounts and allowance.

Sales of Spinraza, the first drug approved for treating spinal muscular atrophy, increased 42% year over year to $518.0 million. Spinraza sales rose 10.3% sequentially as strong sales performance in ex-U.S. markets offset lower sales in the United States. Spinraza’s sequential sales growth of more than 10% was far ahead of the guidance of flat sequential sales provided back in January.

Spinraza U.S. sales were $223.3 million in the quarter, down 5.5% sequentially. In ex-U.S. markets, Spinraza sales rose 26% sequentially to $295.2 million. The number of patients on Spinraza grew approximately 5% in the United States and 24% outside the United States in the quarter compared with the end of the fourth quarter of 2018. Spinraza was approved in China in February this year.

Samsung Bioepis, the joint venture between Biogen and Samsung BioLogics, markets three anti-TNF biosimilars in the EU — Flixabi (a biosimilar referencing J&J JNJ /Merck’s Remicade), Benepali (a biosimilar referencing Amgen/Pfizer’s Enbrel) and Imraldi (a biosimilar referencing AbbVie’s [ABBV] Humira). Biosimilars revenues increased 36.7% year over year to $175 million in the quarter driven by Imraldi’s launch. Imraldi, launched in mid-October last year, generated sales of $35.7 million in the first quarter. Benepali recorded sales of $124 million in the quarter, up 3% year over year. Flixabi sales of $14.7 million more than doubled from $6.6 million in the year-ago quarter.

Research and development (R&D) expenses increased 13% year over year to $564 million. Selling, general and administrative (SG&A) expenses were up 13% year over year to $563 million. However, both R&D and SG&A costs declined sequentially in the first quarter.

Key Q1 Developments

Last month, Biogen entered into an agreement to acquire London based clinical-stage gene-therapy company, Nightstar Therapeutics for approximately $800 million. In January, Biogen announced two strategic collaborations to develop potential therapies for Alzheimer’s disease, Parkinson’s disease and other devastating neurological diseases.

Also last month, Biogen and partner Eisai discontinued two phase III studies - ENGAGE and EMERGE – on aducanumab in early Alzheimer’s disease (AD). The decision was taken following a futility analysis conducted by an independent data monitoring committee (“IDMC”). The analysis showed that the studies are unlikely to meet their primary endpoints.

Our Take

Biogen beat estimates for both earnings and sales in the first quarter fueled mainly by strong performance of its newest drug, Spinraza, which we believe has multi-billion dollar potential. We like Biogen’s efforts to diversify beyond MS to other areas like Alzheimer’s, Parkinson's and stroke, among others and its efforts to regularly in-license assets to build its pipeline. Several of these assets have transformative potential.

Several data readouts are expected in 2019 with multiple potential launches in the early 2020s. However, its core MS business, excluding Ocrevus royalties, has been on a declining trend. Also, potential competition to Spinraza from competitors’ gene therapy programs for SMA is a concern. Though Biogen’s CNS pipeline is attractive, it is a high-risk area as evident from the recent failure of aducanumab.

Biogen currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen Inc. Price, Consensus and EPS Surprise

 

Biogen Inc. Price, Consensus and EPS Surprise | Biogen Inc. Quote

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