Biogen (BIIB) to Report Q1 Earnings: What's in the Cards?

Zacks Equity Research

We expect Biogen Inc. BIIB to beat estimates when it reports first-quarter 2019 results on Apr 24, before market open. Last quarter, the company delivered a positive earnings surprise of 4.02%.

Biogen’s shares have declined 24.8% this year so far against the industry’s increase of 2.9% in the same time frame.

 

 

Biogen’s earnings performance has been strong as it delivered a positive surprise in each of the last four trailing quarters, with the average being 6.49%.

Biogen Inc. Price and EPS Surprise

 

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

 

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

Factors to Consider

On the fourth-quarter conference call, Biogen had said that it expects core MS revenues (excluding royalties on Ocrevus) to be similar to 2018, which implies a year-over-year decline.

In the fourth quarter, MS revenues benefited from $115 million in inventory channel build, expected to reverse in the to-be reported quarter. Therefore, a potential inventory draw down is expected to hurt revenues in the first quarter of 2019.

Among the MS drugs, Tecfidera’s U.S. revenues were relatively stable in the second half of 2018 against declines seen in the first half. U.S. Tecfidera revenues are expected to remain stable in the first quarter of 2019. 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, are expected to be hurt by Ocrevus launch.

The Zacks Consensus Estimate for sales of Tecfidera in the first quarter is pegged at $1.08 billion while that for Tysabri (Global In-Market sales) is $447 million.

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

Biogen receives royalties on U.S. sales of Roche’s (RHHBY) newly launched MS drug, Ocrevus. The Zacks Consensus Estimate for Ocrevus royalties is $148 million for the first quarter of 2019.

Biogen’s new drug, Spinraza, approved for spinal muscular atrophy, saw strong sales performance in 2018. On the Q4 call, management guided that in 2019, global Spinraza revenues are expected to grow in the mid to high-teens range with growth in both the U.S. and ex-U.S. Global Spinraza revenues are expected to be flat sequentially in the first quarter due to seasonality with return to growth beyond first quarter. In ex-U.S. markets, Spinraza’s uptake will be driven by continued patient growth in 2019 although at a more modest rate in more markets. The Zacks Consensus Estimate for Spinraza is $488 million in the first quarter.

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 AbbVie’s ABBV Humira). Interestingly in 2018, biosimilars contributed significantly to Biogen’s top line. Biogen expects biosimilars to record double-digit revenue growth through 2019, primarily driven by the launch of Imraldi.

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. Investor questions are expected on the strategic benefits of the deals and plans to integrate them on the first-quarter earnings call.

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. Investors are expected to question management on future plans for aducanumab on the investor call.

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 ($6.91 per share) and the Zacks Consensus Estimate ($6.86 per share), is +0.73%. 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 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.

Stocks to Consider

Large biotech/pharma stocks that have both a positive ESP and a favorable Zacks Rank include:

Incyte Corporation INCY with an Earnings ESP of +14.47% and a Zacks Rank #1. The company is slated to release results on Apr 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pfizer, Inc. PFE with an Earnings ESP of +0.65% and a Zacks Rank #3. The company is slated to release results on Apr 30.

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