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Can Biogen (BIIB) Keep the Earnings Streak Alive in Q2?

Zacks Equity Research

We expect Biogen Inc. BIIB to beat estimates when it reports second-quarter 2019 results on Jul 23, before market open. Last quarter, the company delivered a positive earnings surprise of 1.60%.

Biogen’s shares have declined 22.8% this year so far against the industry’s increase of 0.5% in the same time frame.

Biogen’s earnings performance has been strong as it delivered a positive surprise in each of the four trailing quarters with the average being 6.39%.

Biogen Inc. Price and EPS Surprise

 

Biogen Inc. Price and EPS Surprise

Biogen Inc. price-eps-surprise | Biogen Inc. Quote

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

Factors to Consider

Biogen’s sales from multiple sclerosis (MS) drugs excluding Ocrevus royalties, declined in the first quarter, a trend we expect to see in the second-quarter results as well. Biogen is receiving royalties on U.S. sales of Roche’s RHHBY newly launched MS drug, Ocrevus.

Among the MS drugs, Tecfidera’s U.S. revenues should continue to be hurt by lower volumes and higher discounts and allowances. Meanwhile, ex-U.S. Tecfidera revenues should continue to benefit from volumes increases in Europe and Japan, which may offset the impact of ongoing price decreases in certain European countries. U.S. sales of another MS drug, Tysabri should continue to be hurt by Ocrevus launch.

The Zacks Consensus Estimate for sales of Tecfidera in the second quarter is pegged at $1.09 billion while that for Tysabri (Global In-Market sales) is $455 million.

Meanwhile, combined interferon revenues (Avonex and Plegridy) are expected to decline due to transition of patients to other oral or high efficacy MS therapies as well as higher discounts and allowance.

Spinraza sales in the first quarter were supported by a strong sales performance in ex-U.S. markets, which offset lower sales in the United States. Sales in the United States were hurt by seasonality. It remains to be seen if Spinraza U.S. sales improve in the second quarter. The Zacks Consensus Estimate for Spinraza is $529 million.

Interestingly biosimilars contributed significantly to Biogen’s top line in the first quarter driven mainly by Imraldi’s launch. Second-quarter results are likely to reflect the same trend. Samsung Bioepis, the joint venture between Biogen and Samsung BioLogics, markets three anti-TNF biosimilars in the EU — Flixabi (a biosimilar referencing Remicade), Benepali (a biosimilar referencing Enbrel) and Imraldi (a biosimilar referencing Humira). Biogen expects biosimilars to record double-digit revenue growth in 2019, primarily driven by the launch of Imraldi.

On the first-quarter conference call, Biogen said that the results from the aducanumab phase III studies and BAN2401 phase II study in Alzheimer’s disease were being analyzed. Based on the results, Biogen will take a decision about the future development plans for BAN2401. An update regarding the same is expected on the second-quarter call.

R&D expenses should be lower in the second quarter owing to the closing of the aducanumab studies.

Earnings Whispers

Our proven model shows that Biogen is likely to beat estimates this quarter because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely positive surprise.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($7.68 per share) and the Zacks Consensus Estimate ($7.51 per share), is +2.30%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Biogen has a Zacks Rank #3. The combination of Biogen’s Zacks Rank #3 and positive ESP makes us reasonably confident of an earnings beat in the upcoming release.

Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

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

Gilead Sciences, Inc. GILD with an Earnings ESP of +3.69% and a Zacks Rank #3. The company is scheduled to release results on Jul 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Regeneron Pharmaceuticals, Inc. REGN has an Earnings ESP of +5.76% and a Zacks Rank #3. The company is scheduled to release results on Aug 6.

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