Why Is Biogen Inc. (BIIB) Up 6.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Biogen Inc. (BIIB). Shares have added about 6.4% in that time frame, outperforming 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.
Q3 Earnings & Sales Beat
Biogen reported third-quarter 2023 adjusted earnings per share (EPS) of $4.36, which beat the Zacks Consensus Estimate of $3.99. Earnings, however, declined 9% year over year due to higher R&D costs. On a constant currency basis, earnings were flat.
Sales came in at $2.53 billion, up 1% on a reported basis (3% on a constant-currency basis) from the year-ago quarter, as lower sales of Tecfidera and Tysabri were partially offset by improved revenues from Spinraza and higher other revenues. Sales beat the Zacks Consensus Estimate of $2.39 billion.
Product sales in the quarter were $1.81 billion, down 8% year over year. Revenues from anti-CD20 therapeutic programs rose 1% to $421.0 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 rose 135% in the quarter to $304.0 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.
Multiple Sclerosis Revenues
Biogen’s MS revenues were $1.16 billion in the reporter quarter, down 14% on a reported basis and 12% 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 29.4% to $239.5 million as multiple generic versions of the drug have been launched in the United States. Tecfidera sales missed the Zacks Consensus Estimate of $245 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 September 2023, some Tecfidera generics had not fully exited these EU markets and some generic products were present in the channel.
Vumerity recorded $165.5 million in sales, up 20% driven by global patient growth. Vumerity sales beat the Zacks Consensus Estimate of $141 million.
Total Fumarates (Tecfidera + Vumerity) revenues were $405.0 million in the quarter, down 15% year over year.
Tysabri sales declined 9.7% year over year to $456.3 million, which missed the Zacks Consensus Estimate and our estimate of $474 million and $475.1 million, respectively. Tysabri sales are being hurt by increased competition.
Combined interferon revenues (Avonex and Plegridy) in the quarter were $277.7 million, down 17.4%, hurt by a continued shift from the injectable platform to oral or high-efficacy therapies.
In 2023, MS revenues are expected to decline as a result of increasing competition for many MS products.
Other Products
Sales of Spinraza rose 4% on a reported basis and 7% on a constant currency basis to $448.2 million. Spinraza sales were slightly better than the Zacks Consensus Estimate of $432 million but missed our estimate of $452.4 million.
Spinraza’s U.S. sales rose 7.3% year over year driven by patient growth and higher pricing. In ex-U.S. markets, Spinraza sales rose 2.3% in actual currency due to favorable shipment timing in certain markets.
Spinraza revenues are expected to be relatively flat in 2023 and may grow thereafter.
In the quarter, biosimilar revenues rose 4% on a reported basis and 7% on a constant currency basis year over year to $194 million. A biosimilar of Roche’s Actemra called Tofidence was approved by the FDA in September. Biogen plans to launch Tofidence in mid-2024.
Biosimilars revenues are expected to be modest in 2023 as the continued launch of Byooviz is expected to make up for pricing pressure in certain markets.
Eisai recorded $2 million in sales from Leqembi in the third quarter. Biogen made changes in Leqembi collaboration accounting. Its 50% share of Leqembi net product revenue continues to be classified as a component of revenues. However, Biogen's 50% share of all expenses for the Leqembi collaboration will be presented in the SG&A expense line instead of as a reduction to revenues.
Regarding Leqembi, Biogen said that 800 patients are on therapy. Eisai expects to have 10,000 patients on therapy by the end of March 2024, which we believe is a rather ambitious target. Infrastructure challenges continue, including access to neurologists, lower capacity for PET scans and difficulty in managing ARIA-related side effects in AD.
On the call, Biogen said, Skyclarys generated sales of $43 million in the third quarter, which appears strong. However, Skyclarys sales were not included in the third quarter revenues as the acquisition closed in September.
Research and development expenses were $539.0 million, down 2% year over year. Adjusted selling, general and administrative expenses declined 2% year over year to $553.0 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 $51 million, which included $56 million of net profit-sharing expense related to Biogen’s collaboration with Samsung Bioepis, partially offset by net reimbursement of $6 million from Sage Therapeutics related to the commercialization of Zurzuvae in the United States.
No shares were repurchased in the third quarter of 2023. Biogen had $2.05 billion remaining under its share buyback plan of $5 billion, which was authorized in October 2020.
2023 Guidance Updated
While Biogen raised its revenue guidance, it lowered its EPS range to include the impact of dilution from the Reata acquisition.
Total revenues are expected to decline by a low-single-digit percentage in 2023 from the 2022 level. Earlier, the company expected revenues to decline by a mid-single-digit percentage. The change in revenue guidance is mainly due to the way the company now presents Leqembi commercial expenses, as discussed above.
Adjusted earnings are expected in the range of $14.50 to $15.00, down from the prior expectation of $15.00 to $16.00 per share, reflecting approximately 75 cents dilution from the acquisition of Reata Pharmaceuticals, which closed in September.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -18.19% due to these changes.
VGM Scores
Currently, Biogen Inc. has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward 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, Intra-Cellular Therapies (ITCI), has gained 13.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Intra-Cellular reported revenues of $126.17 million in the last reported quarter, representing a year-over-year change of +75.6%. EPS of -$0.25 for the same period compares with -$0.57 a year ago.
For the current quarter, Intra-Cellular is expected to post a loss of $0.45 per share, indicating no change from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Intra-Cellular. Also, the stock has a VGM Score of C.
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