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Why Is Biogen Inc. (BIIB) Up 8.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Biogen Inc. (BIIB). Shares have added about 8.2% 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 2022 adjusted earnings per share (EPS) of $4.77, beating the Zacks Consensus Estimate of $4.13 and our model estimate of $4.30. Earnings were flat year over year

Sales came in at $2.51 billion, down 10% on a reported basis (8% on a constant-currency basis) from the year-ago quarter, hurt by lower sales of Tecfidera and Spinraza. Sales, however, beat the Zacks Consensus Estimate and our estimates of $2.47 billion and $2.4 billion, respectively.

Product sales in the quarter were $1.96 billion, down 11.0% year over year. Royalties on sales of Roche’s Ocrevus were $281.1 million in the quarter, up 6.4% year over year. Revenues from Biogen’s share of Roche’s drugs, Rituxan and Gazyva declined 10.2% from the year-ago period to $135.8 million due to biosimilar competition for Rituxan. Other revenues declined 17.9% in the quarter to $129.5 million.

Multiple Sclerosis Revenues

Biogen’s MS revenues were $1.62 billion in the reporter quarter, including Ocrevus royalties, which declined 11% on a reported basis and 9% on a constant currency basis year over year.

Tecfidera sales declined 32.0% on a reported basis and 30% on a constant currency basis to $339.0 million as multiple generic products have been launched in the United States. U.S. Tecfidera revenues declined 48.4% to $92.5 million. Outside U.S. revenues fell 22.8% to $246.5 million, hurt by generic competition in some markets, primarily Germany. Biogen is seeing new generic launches in other EU countries.

In October, the advocate general of the European Court of Justice issued a non-binding advisory opinion. Biogen expects Tecfidera to have statutory market protection until at least February 2024, if the court adopts the advisory opinion. Biogen expects a final decision in 3-5 months.

Biogen was granted an additional patent in the EU for Tecfidera, which is expected to expire in 2028. Biogen is filing actions to enforce this patent. It obtained preliminary injunctions in some countries to prevent generic entry while injunctions have not been pursued in some countries, including Germany and France. Generics continue to be sold in markets where preliminary injunctions are not in place.

Vumerity recorded $137.8 million in sales, up 14% at actual currency and 15% at constant currency. Our estimate for Vumerity stood at $147 million. In the United States, payer pressure and the contraction of the oral segment of the market are hurting sales. In outside U.S. markets, Vumerity is in the early stages of launch. However, due to contract manufacturing supply issues, the company has delayed any further country launches and expects to resume new country launches in 2023.

Total Fumarates (Tecfidera + Vumerity) revenues were $476.8 million in the quarter, down 23% year over year.

Tysabri sales declined 3% at actual currency and 1% at constant currency at $505.5 million. Our estimate for the drug was pegged at $509.6 million.

In the United States, Tysabri revenues were hurt by volume declines and higher discounts and allowances. In outside U.S. market, continued patient growth and good uptake of the subcutaneous formulation benefited sales growth.

In 2022, Tecfidera revenues are expected to continue to decline as a result of increasing generic competition. Biogen expects increased sales volumes of Vumerity in 2022 compared with 2021, mostly driven by demand growth. Tysabri revenues are expected to be flat in 2022 compared with 2021 despite increased competitive pressure and price reductions in certain European markets.

Combined interferon revenues (Avonex and Plegridy) in the quarter were $336.0 million, down 13% at actual currency and 12% at constant currency hurt by a continued shift from the injectable platform to oral or high-efficacy therapies.

Other Products

Sales of Spinraza declined 3% year over year to $431.1 million due to a decrease in demand as a result of increased competition.  On a constant currency basis, sales rose 2% in the quarter. Our estimate for the drug was pegged at $444.2 million.

Spinraza’s U.S. sales were $140.2 million in the quarter, almost flat year over year due to increased competition. However, Biogen said it is seeing some signs of stabilization in patient use in the United States.

In ex-U.S. markets, Spinraza sales declined 4.4% year over year to $290.9 million due to currency headwinds. However, revenues increased on a constant currency basis in ex-U.S. markets due to volume growth in certain Asian markets as well as some positive pricing dynamics, partially offset by increased competition in markets like Germany and Japan and unfavorable timing of shipments.

In 2022, Spinraza’s sales growth rate is expected to be hurt by a lower rate of new patient starts and continued patient discontinuations due to increased competition. These factors coupled with the impact of loading dose dynamics as patients transition to dosing once every four months and lower prices in some international markets may hurt sales.

In the quarter, biosimilars revenues decreased 7% year over year (4% in constant currency) to $188 million as increased volumes were offset by the impact of pricing pressure and currency headwinds.

Benepali recorded sales of $110.2 million in the quarter, down 8.8% year over year. Flixabi sales were $19.0 million, down 22.8% year over year. Imraldi sales of $57.7 million were almost flat year over year.

In the quarter, Biogen recorded $0.7 million in revenues from new biosimilar Byooviz. However, it expects the biosimilar to be a more meaningful revenue contributor starting 2023.

Full-year 2022 biosimilars revenues are expected to decline in 2022 due to pricing pressure in certain markets.

Aduhelm recorded sales of $1.6 million in the third quarter, compared with $0.1 million in the previous quarter. Fumaderm sales were $1.5 million, down 40% year over year.

Research and development (R&D) expenses were $549.2 million, down 21.8% year over year. Adjusted selling, general and administrative (SG&A) expenses declined 13.7% year over year to $561.8 million due to cost savings.

Biogen repurchased 1.2 million shares worth $250 million in the quarter. Biogen had $2.05 billion remaining under its new share buyback plan of $5 billion as of Sep 30, 2022.

2022 Guidance

The company raised its previously issued total revenues as well as earnings guidance for 2022. A better-than-expected sales performance and cost savings prompted the guidance increase.

Total revenues are now expected in the range of $10.0 to $10.15 billion in 2022, up from $9.9-$10.1 billion expected previously. However, the company expects continued erosion of Tecfidera’s sales due to generic entry. The guidance also assumes significant erosion of Rituxan in the United States due to biosimilar competition.

Adjusted earnings are expected in the range of $16.50 to $17.15, up from the prior expectation of $15.25-$16.75.

Adjusted R&D expense is expected in the range of $2.2 billion to $2.3 billion, the same as previous expectations. Adjusted SG&A is expected to be between $2.3 billion and $2.4 billion, unchanged from the previous expectations. Biogen typically sees seasonally higher SG&A spend in the fourth quarter.

The adjusted tax rate is expected to be between 15.5% and 16.5%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, 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 A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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 #2 (Buy). We expect an above average return from the stock in the next few months.

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