Why Is Biogen Inc. (BIIB) Up 2.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Biogen Inc. (BIIB). Shares have added about 2.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Biogen Inc. due for a pullback? 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 drivers.
Q4 Earnings & Sales Miss Estimates
Biogen’s fourth-quarter results were weak as it missed estimates on both counts.
Biogen reported fourth-quarter 2023 adjusted earnings per share (EPS) of $2.95, which missed the Zacks Consensus Estimate of $3.16. Earnings declined 27% year over year. On a constant currency basis, earnings were flat.
Earnings were hurt by a 35-cent closeout cost for Biogen’s controversial Alzheimer’s drug, Aduhelm, and lower revenues.
Total revenues came in at $2.39 billion, down 6% on a reported basis (5% on a constant-currency basis) from the year-ago quarter due to lower sales of all key drugs, Tecfidera, Tysabri and Spinraza. Sales missed the Zacks Consensus Estimate of $2.45 billion.
Product sales in the quarter were $1.83 billion, down 4% year over year. Revenues from anti-CD20 therapeutic programs declined 3% to $435.8 million. The revenues include royalties on sales of Roche’s Ocrevus and Biogen’s share of Roche’s drugs, Rituxan, Gazyva and Lunsumio.
Contract manufacturing and royalty revenues declined 38% in the quarter to $118.1 million. Contract manufacturing and royalty revenues include Biogen’s 50% share of revenues (including royalties) from the Leqembi collaboration with Eisai and revenues from the manufacturing of Leqembi. Eisai recorded $7 million in sales from Leqembi in the fourth quarter compared with $2 million in the third quarter.
At the conference call, the company mentioned that it plans to expand its U.S. salesforce by approximately 30% to increase promotional efforts for Leqembi. The launch in Japan is underway an dthe company expected to launch in China later this year.
Multiple Sclerosis Revenues
Biogen’s MS revenues were $1.17 billion in the reporter quarter, down 8% on a reported basis and 6% on a constant currency basis year over year due to generic competition for Tecfidera and rising competitive pressure in the MS market.
Tecfidera sales declined 17.8% to $244.3 million as multiple generic versions of the drug have been launched in the United States and new generic launches are ongoing in several EU countries. Tecfidera sales missed the Zacks Consensus Estimate of $247 million but beat our model estimate of $214.8 million.
Tecfidera’s regulatory market protection in the EU has been extended until February 2025. However, the pace of withdrawal of generics already launched in a few EU markets has been slower than expected. As of December 2023, some Tecfidera generics had not fully exited these EU markets and Biogen believes removal of all generics from the market will take some time.
Vumerity recorded $156.4 million in sales, up 3.7%. Vumerity sales missed the Zacks Consensus Estimate of $174.0 million and our model estimate of $171.8 million. Vumerity sales are being hurt by pricing pressure and an overall contraction of the oral segment of the U.S. market. The negative trend is expected to continue in 2024.
Total Fumarates (Tecfidera + Vumerity) revenues were $400.7 million in the quarter, down 10.5% year over year.
Tysabri sales declined 4.9% year over year to $464.7 million, hurt by increased competition and pricing pressure. Tysabri's sales beat the Zacks Consensus Estimate of $444 million and our estimate of $448 million.
Combined interferon revenues (Avonex and Plegridy) in the quarter were $280.0 million, down 9.6%, hurt by a continued shift from the injectable platform to oral or high-efficacy therapies.
In 2024, MS revenues are expected to continue to decline as a result of increasing competition for many MS products.
The first quarter of 2024 is expected to be a seasonally weaker quarter for the MS business driven by higher discounts and allowances and some channel dynamics.
Rare Disease Drugs
Sales of Spinraza declined 10% to $412.6 million. Spinraza sales missed the Zacks Consensus Estimate of 447 million and our estimate of $459.5 million
Spinraza’s U.S. sales were almost flat year over year. In ex-U.S. markets, Spinraza sales declined 15.5% due to unfavorable shipment timing in certain markets and pricing pressure and competition in Europe.
Rare disease drug Skyclarys, which was added with the September 2023 acquisition of Reata Pharmaceuticals, generated sales of $55.9 million in the fourth quarter. On the conference call, the company said that approximately 1,000 patients were on Skyclarys therapy within about six months of launch, which is about 20% of the potential patient population. Following the approval of Skyclarys in the EU, Biogen will launch the same in Germany shortly
Qalsody, which was launched for amyotrophic lateral sclerosis (ALS) in the second quarter of 2023, recorded sales of $3.3 million in the fourth quarter.
In 2024, Biogen expects rare disease revenues to grow as it continues to launch Skyclarys in the United States. Spinraza revenues are expected to be flat in 2024 as moderate growth in U.S. revenues as well as continued access expansion in emerging markets will likely offset the impact of increased competition and the impact of loading dose dynamics.
Other Products
In the quarter, biosimilar revenues rose 8% to $188.2 million.
Biosimilars revenues are expected to be modest in 2024 as the continued launch of Byooviz is expected to make up for pricing pressure in certain markets. Biogen continues to evaluate strategic options for this business.
Costs Decline
Research and development expenses were $568.0 million, down 6% year over year. Adjusted selling, general and administrative expenses declined 7% year over year to $588.0 million, driven by the company’s cost-saving initiatives, partially offset by an increase in commercialization expense for Leqembi and Zurzuvae.
In the quarter, the collaboration profit-sharing was a net expense of $54 million, which included $53 million of net profit-sharing expense related to Biogen’s biosimilar collaboration with Samsung Bioepis and approximately $1 million of net profit-sharing expense related to Biogen’s collaboration with Sage Therapeutics related to the commercialization of Zurzuvae in the United States. On the fourth-quarter conference call, Biogen said the Initial launch uptake of Zurzuvae has exceeded management’s expectations.
No shares were repurchased in the fourth quarter of 2023. Biogen had $2.1 billion remaining under its share buyback plan of $5 billion, which was authorized in October 2020.
2023 Results
For 2023, Biogen generated revenues of $9.84 billion, which missed the Zacks Consensus Estimate of $9.93 billion. Revenues declined 3% year over year on a reported basis, in line with the guidance of a decline in a low-single-digit percentage.
Earnings were $14.72 a share, down 17% year over year. Earnings missed the Zacks Consensus Estimate of $14.97 but were within the guidance range of $14.50 to $15.00.
2024 Guidance
Total revenues are expected to decline by a low- to mid-single-digit percentage in 2024 from the 2023 level. Core pharmaceutical revenues, comprising product sales plus Leqembi revenues, are expected to be flat in 2024 compared to 2023 levels as declines in MS revenues are expected to be offset by higher revenues from new products.
Contract manufacturing revenues are expected to be significantly lower throughout 2024 compared with 2023.
Adjusted earnings are expected in the range of $15.00 to $16.00, implying growth of approximately 5% at the midpoint.
Combined R&D and SG&A expense is expected to be approximately $4.3 billion in 2024.
Operating income is expected to grow at a low-double-digit percentage in 2024, driven by lower cost of sales and lower operating costs due to the cost-saving initiatives.
The operating margin is expected to increase by a mid-single-digit percentage point in 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Biogen Inc. has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Biogen Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Biogen Inc. belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Deciphera Pharmaceuticals, Inc. (DCPH), has gained 4.6% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Deciphera Pharmaceuticals, Inc. reported revenues of $48.3 million in the last reported quarter, representing a year-over-year change of +32.9%. EPS of -$0.54 for the same period compares with -$0.60 a year ago.
Deciphera Pharmaceuticals, Inc. is expected to post a loss of $0.56 per share for the current quarter, representing a year-over-year change of +6.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.8%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Deciphera Pharmaceuticals, Inc. Also, the stock has a VGM Score of D.
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