Biogen Inc. (BIIB) Up 1.1% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Biogen Inc. (BIIB). Shares have added about 1.1% 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 the most recent earnings report in order to get a better handle on the important drivers.

Q2 Earnings & Sales Beat

Biogen reported second-quarter 2022 earnings per share (EPS) of $5.25, which significantly beat the Zacks Consensus Estimate of $4.10. EPS declined 6% year over year.

Sales came in at $2.59 billion, down 7% on a reported basis (5% 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 of $2.47 billion.

Product sales in the quarter were $2.05 billion, down 8.1% year over year. Royalties on sales of Roche’s Ocrevus were $291.9 million in the quarter, up 13.6% year over year. Revenues from Biogen’s share of Roche’s drugs, Rituxan and Gazyva declined 21% from the year-ago period to $144.0 million due to biosimilar competition for Rituxan. Other revenues declined 1% in the quarter to $97.9 million.

Multiple Sclerosis Revenues

Biogen’s MS revenues were $1.72 billion in the reporter quarter, including Ocrevus royalties, which declined 4% on a reported basis and 3% on a constant currency basis year over year.

Tecfidera sales declined 18.4% to $397.9 million in the quarter as multiple generic products have been launched in the United States. U.S. Tecfidera revenues declined 32.3% to $120.7 million. Outside U.S. revenues decreased 10.4% to $277.2 million, hurt by generic competition in markets such as Canada and Germany.

Biogen was granted an additional patent in the EU for Tecfidera, which is expected to expire in 2028. Though Biogen intends to enforce this patent, generics may launched at-risk.

Biogen expects the entry of generics in European markets to hurt the drug’s international sales going forward. However, Biogen said it is difficult to predict when generics will be launched, though several generic applications have been approved in Europe

New drug Vumerity recorded $136.8 million in sales, up 51% at actual currency and 52% at constant currency. Vumerity is launched in 14 outside U.S. markets. However, due to contract manufacturing supply issues, it has delayed any further country launches.

Total Fumarates (Tecfidera + Vumerity) revenues were $534.7 million in the quarter, down 7.1% year over year.  

Tysabri sales declined 2% at actual currency and were flat at constant currency at $516.2 million, In the United States, Tysabri revenues were hurt by modest volume declines, partially offset by favorable pricing. In outside U.S. market, continued patient growth benefited sales growth. Regulatory applications seeking approval for a biosimilar referencing Tysabri have been filed in both the United States and Europe. A biosimilar could be launched upon approval in both the United States and EU in 2023.

In 2022, Tecfidera revenues in the United States 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 $350.2 million, down 12.5% year over year hurt by a continued shift from the injectable platform to oral or high efficacy therapies.

Other Products

Sales of Spinraza declined 14% (11% on a constant currency basis) year over year to $431.1 million due to a decrease in demand as a result of increased competition and unfavorable pricing.  

Spinraza’s U.S. sales were $139.8 million in the quarter, down 6.4% year over year due to increased competition and some seasonal dynamics. However, Biogen is witnessing a continued slowdown in patient discontinuations.

In ex-U.S. markets, Spinraza sales declined 16.9% year over year to $291.3 million due to the unfavorable timing of shipments in certain markets, competition and currency headwinds.

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 4% year over year (3% in constant currency) to $194 million as increased volumes were offset by the impact of pricing pressure and currency headwinds.

Benepali recorded sales of $115.8 million in the quarter, down 4.7% year over year. Flixabi sales were $20.5 million, down 19% year over year. Imraldi sales of $57.6 million declined 3.6% year over year.

In the quarter, Biogen recorded some modest initial revenues of Byooviz due to channel stocking. However, it expects the biosimilar to be a more meaningful revenue contributor starting in 2023.

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

Aduhelm, approved in June 2021, recorded sales of $0.1 million in the second quarter, compared with $2.8 million in the previous quarter. Fumaderm sales were $2.7 million, down 32.3% year over year.

Research and development (R&D) expenses were $529 million, down 9.6% year over year due to lower upfront payments. Selling, general and administrative (SG&A) expenses declined 10.2% year over year to $570 million including approximately $29 million related to Aduhelm.

Biogen repurchased 2.4 million shares worth $500 million in the quarter. Biogen has $2.3 billion remaining under its new share buyback plan of $5 billion as of Jun 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 expected in the range of $9.9 to $10.1 billion in 2022, up from $9.7-$10.0 billion expected previously. The company expects continued erosion of Tecfidera’s sales in the United States and reflects a range of scenarios for the impact of Tecfidera generics in the EU. The guidance also assumes significant erosion of Rituxan in the United States due to biosimilar competition.

Adjusted earnings are expected in the range of $15.25 to $16.75, up from the prior expectation of $14.25-$16.00.

Biogen said it experienced a headwind of approximately $55 million to revenues and $0.20 to EPS due to currency fluctuations between Apr 29 and Jul 15. This is in addition to a headwind of approximately $120 million to revenues and $0.35 to EPS between Jan 1 and Apr 29. The guidance assumes that foreign exchange rates, as of Jul 15, will remain in effect for the remainder of the year

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.

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

Pipeline Update

The BLA for lecanemab has been granted priority review under the accelerated approval pathway. A FDA decision is expected by Jan 6, 2023

Regarding lecanemab, Biogen said that data from the phase III confirmatory study, Clarity AD, is expected to be released in fall 2022. Biogen and Eisai plan to seek full FDA approval for lecanemab by the first quarter of 2023 based on data from the Clarity AD study, which will serve as a confirmatory study. Eisai plans to file for traditional approval of lecanemab in the United States, EU and Japan by the end of the first quarter of 2023.

Biogen announced that the phase II TALLLY study on BIIB104 for cognitive impairment associated with schizophrenia (CIAS) did not meet its primary or secondary efficacy endpoints. Biogen decided to discontinue the development of BIIB104 for CIAS, following consistent lack of efficacy observed across the primary and secondary measures of cognition and functioning.

Biogen and Sage Therapeutics expect to file a single new drug application (NDA) seeking approval of zuranolone for the treatment of both major depressive disorder (MDD) and PPD. The submission of this single NDA is expected to be completed in the second half of 2022 to seek priority review of the filing.

CEO Search

Biogen’s search for a new chief executive officer is progressing as planned. The present CEO, Michel Vounatsos will continue in his position until his replacement is found.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Biogen Inc. has an average Growth Score of C, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Biogen Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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