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Biogen (BIIB) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Biogen Inc. BIIB is set to report third-quarter 2019 results on Oct 22, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 20.71%.

Biogen’s shares have declined 24.9% this year so far compared with the industry’s decrease of 6.4% 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 8.79%.

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

Second-quarter MS revenues, excluding Ocrevus royalties, were flat over year. We do not expect it to have improved much in the third quarter. Biogen is receiving royalties on U.S. sales of Roche’s RHHBY newly launched MS drug, Ocrevus, which is likely to have contributed to the top line in the third quarter.

Among the MS drugs, Tecfidera’s U.S. revenues are expected to have increased as the share of new prescriptions is rising. Meanwhile, ex U.S. Tecfidera revenues are likely to have benefited from volumes increases in Europe and Japan in the third quarter, which might have offset the impact of ongoing price decreases in certain European countries. U.S. sales of another MS drug, Tysabri may have been hurt by Ocrevus launch.

On the second-quarter conference call, management said that launch of Novartis’ new drug Mayzent (siponimod) has had a minimal impact on sales of Tysabri and Tecfidera. An update is expected on the upcoming call.

The Zacks Consensus Estimate for sales of Tecfidera in the third quarter is pegged at $1.12 billion while that for Tysabri (Global In-Market sales) is $462 million.

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

Spinraza sales in the second quarter were supported by continued patient growth in U.S. markets, which made up for sequentially lower sales in ex-U.S. markets due to positive pricing adjustment in France in the first quarter, unfavorable timing of shipments in some markets and continued transition from loading to less-intensive maintenance doses in more mature markets. It remains to be seen if ex-U.S. sales have improved in the third quarter. The Zacks Consensus Estimate for sales of Spinraza is $519 million.

Interestingly biosimilars contributed significantly to Biogen’s top line in the first half driven mainly by Imraldi’s launch, a trend that most likely continued in the third quarter.

In September, Biogen and Eisai discontinued two late-stage studies on its Alzheimer’s disease (AD) candidate, elenbecestat. The decision was taken following a safety review conducted by the Data Safety Monitoring Board. The board’s recommendation to discontinue the studies was due to unfavorable risk-benefit ratio. An update on Biogen’s plans for its AD program is expected on the third-quarter call, especially after failure of two AD candidates this year. In March, Biogen/Eisai had discontinued ENGAGE and EMERGE phase III studies on aducanumab in early AD.

Lower R&D costs following the closing of the aducanumab and elenbecestat studies are expected to get reflected in the bottom-line number.

Earnings Whispers

Our proven model predicts an earnings beat for Biogen this earnings season 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 ($8.44 per share) and the Zacks Consensus Estimate ($8.26 per share), is +2.18%. 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 +1.80% and a Zacks Rank #3. The company is scheduled to release results on Oct 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amgen, Inc. AMGN has an Earnings ESP of +1.44% and a Zacks Rank #3. The company is scheduled to release results on Oct 29.

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Roche Holding AG (RHHBY) : Free Stock Analysis Report
 
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