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Why Is Biogen (BIIB) Up 7.7% Since Last Earnings Report?

A month has gone by since the last earnings report for Biogen Inc. (BIIB). Shares have added about 7.7% 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 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.

Q1 Earnings Beat, Sales Miss

Biogen’s first-quarter results were mixed as it beat estimates for earnings but missed the mark for sales.

Biogen reported first-quarter 2024 adjusted earnings per share (EPS) of $3.67, beating the Zacks Consensus Estimate of $3.45. Earnings rose 8% year over year, driven by cost savings and margin improvements. On a constant-currency basis, earnings were flat.

Total revenues came in at $2.29 billion, down 7% on a reported basis and a constant-currency basis due to lower sales of Tecfidera, Tysabri and Spinraza. However, launches of Leqembi, Skyclarys and Zurzuvae picked up in the quarter. Sales missed the Zacks Consensus Estimate of $2.32 billion.

Product sales in the quarter were $1.71 billion, down 3% year over year. Revenues from anti-CD20 therapeutic programs declined 1% to $394.0 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 declined 39% in the quarter to $184.6 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 nearly $19 million in sales from Leqembi in the first quarter. Sales nearly tripled sequentially from $7 million in the fourth quarter of 2023.

Biogen said that the number of patients on Leqembi therapy increased nearly 2.5 times since 2023-end. On the conference call, the company mentioned that it plans to expand its U.S. salesforce by 30% to increase promotional efforts for Leqembi as access and infrastructure are progressing and patient volume is accelerating.

Multiple Sclerosis Revenues

Biogen’s MS revenues were $1.08 billion in the reporter quarter, down 4% on a reported basis as well as a constant currency basis year over year due to generic competition for Tecfidera and rising competitive pressure in the MS market. Sales were hurt by the usual channel seasonality seen in the first quarter.

Tecfidera sales declined 7.4% to $254.3 million as multiple generic versions of the drug have been launched in the United States, Brazil and certain EU countries. Tecfidera sales beat the Zacks Consensus Estimate of $224 million as well as our estimate of $199 million.

Tecfidera’s regulatory market protection in the EU has been extended until February 2025. On the conference call, Biogen said that most Tecfidera generics had exited these EU markets, which led to sales rising 5% in ex-U.S. markets.

Vumerity recorded $127.5 million in sales, up 18% driven by global patient growth and favorable channel dynamics during the first quarter. Vumerity sales missed the Zacks Consensus Estimate of $138 million and our model estimate of $152 million.

Tysabri sales declined 9% year over year to $431.3 million, hurt by increased competition and higher discounts/allowances. Tysabri's sales missed the Zacks Consensus Estimate of $434 million and our estimate of $435 million.

Combined interferon revenues (Avonex and Plegridy) in the quarter were $243.6 million, down 1%, 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.

Rare Disease Drugs

Sales of Spinraza declined 23% to $341.3 million, primarily due lower sales in ex-U.S. territories. Sales of the drug missed the Zacks Consensus Estimate of $421 million and our estimate of $442 million

Spinraza’s U.S. sales rose 1% year over year. In ex-U.S. markets, Spinraza sales declined 35% due to unfavorable shipment timing in certain emerging markets, increased competition and currency headwinds.

Skyclarys, which was added with the September 2023 acquisition of Reata Pharmaceuticals, generated sales of $78.0 million in the first quarter, compared with $55.9 million in fourth-quarter 2023. Biogen said that the U.S. launch of Skyclarys is progressing and the EU launch is underway.

On the conference call, the company said that approximately 1,100 patients were on Skyclarys therapy in the United States, which is about 24% of the potential patient population. In Europe, it already has 300 patients on therapy. Biogen expects meaningful revenues from the EU from 2025 due to reimbursement policies from the region.

Qalsody, which was launched for amyotrophic lateral sclerosis (ALS) last year, recorded sales of $4.6 million in the first quarter compared with $3.3 million in the fourth quarter of 2023. Biogen said the uptake of Qalsody is encouraging.

In 2024, Biogen expects global Spinraza revenues to decline by a low single-digit percentage. Biogen expects stable patient volumes globally, while the shipping dynamics in ex-U.S. markets are expected to normalize through the remainder of the year.

Other Products

In the quarter, biosimilar revenues rose 2% to $196.9 million

Growth in biosimilars revenues is expected to be modest in 2024. Supply constraints for Imraldi and Benepali may hurt sales in 2024. Biogen continues to evaluate strategic options for this business including retaining the business.

Costs Decline

Research and development expenses declined 22% year over year to $447 million. Adjusted selling, general and administrative expenses declined 6% to $569 million. The decline in both SG&A and R&D costs was due to savings achieved from the company’s “Fit for Growth” initiative and R&D portfolio re-prioritization initiatives, partially offset by an increase in commercialization expense for Leqembi and Skyclarys.

In the quarter, the collaboration profit-sharing was a net expense of $66 million, which included $61 million of net profit-sharing expense related to Biogen’s biosimilar collaboration with Samsung Bioepis and approximately $5 million of net profit-sharing expense related to Biogen’s collaboration with Sage Therapeutics related to the commercialization of Zurzuvae in the United States. Biogen said the launch uptake of Zurzuvae is showing encouraging early trends. The company is seeing several positive trends with providers, patient experience and reimbursement.

No shares were repurchased in the first quarter of 2024. Biogen had $2.1 billion remaining under its share buyback plan of $5 billion, which was authorized in October 2020.

2024 Guidance

Management reiterated its previously issued guidance for 2024. 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.

Biogen expects better top-line growth in the second half of the year due to the timing of shipments for Spinraza in ex-U.S. markets as well as the expected growth from newly launched products like Leqembi, Skyclarys and Zurzuvae.

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 expenses are 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.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Biogen has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, 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 A. 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 has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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