Biogen BIIB reported second-quarter 2020 earnings per share of $10.26, which comprehensively beat the Zacks Consensus Estimate of $7.99. Earnings rose 12% year over year.

Sales of the biotech giant came in at $3.68 billion, up 2% from the year-ago quarter. Sales also beat the Zacks Consensus Estimate of $3.43 billion. Total revenues rose 4% on a sequential basis.

Higher sales of its multiple sclerosis (MS) drug Tecfidera and one-time licensing revenues in the quarter offset lower sales of Tysabri and spinal muscular atrophy (SMA) drug, Spinraza as well as biosimilar products.

Product Sales Rise

Product sales in the quarter were $2.8 billion, down 3% year over year. Royalties on sales of Roche’s RHHBY Ocrevus were $208 million in the quarter, up 14% year over year. Revenues from Biogen’s share of Rituxan and Gazyva operating profits declined 31% from the year-ago period to $270 million. Other revenues surged 155% in the quarter to $408 million due to one-time licensing revenues of $330 million in the quarter.

Multiple Sclerosis Revenues

Biogen’s MS revenues were $2.34 billion in the reporter quarter, including Ocrevus royalties, which declined 2% year over year but rose 2% sequentially. Biogen receives royalties on U.S. sales of Roche’s Ocrevus.

Tecfidera sales rose 3% year over year to $1.18 billion driven by patient growth. Tecfidera global sales were up 8% sequentially. We believe that COVID-19 did not have a significant impact on Tecfidera sales in the second quarter as the majority of Tecfidera prescriptions in the United States are delivered via mail.

Vumerity, launched in the United States late in 2019, recorded $9 million in sales, higher than $2 million in the previous quarter.

Total Fumarates (Tecfidera + Vumerity) revenues were $1.19 billion in the quarter, up 3% year over year.  U.S. Fumarates sales in the quarter were $921.7 million, up 6% year over year. Ex-U.S. sales were $268.6 million, up 4.2% year over year.

Tysabri sales declined 9% year over year and 17% sequentially to $432 million. Tysabri U.S. sales declined 7.6% to $244.1 million in the quarter. International revenues declined 10.9% to $187.9 million.

Tysabri is administered in a hospital setting. This means that hospitals may have delayed Tysabri infusions as they prioritized treatment of COVID-19 patients or patients may have chosen to delay treatment, which hurt the drug’s sales in the second quarter.

Combined interferon revenues (Avonex and Plegridy) in the quarter were $481 million, down 13% year over year. Avonex revenues declined 11% from the year-ago quarter to $389 million. Plegridy contributed $93 million to revenues, down 20% year over year.

Other Products

Sales of key SMA drug, Spinraza increased 1% year over year to $495 million as higher sales in ex-U.S. markets offset lower sales in the United States. Spinraza sales declined 12% sequentially.

Spinraza U.S. sales were $210.3 million in the quarter, down 8.8% year over year. In ex-U.S. markets, Spinraza sales rose 23.3% year over year to $284.3 million.

Spinraza’s new patient starts and regimen compliance may have declined in the United States in the second quarter, particularly among adults due to COVID-19 as it is administered in a physician’s office. Amid the pandemic situation and government lockdowns, people may have postponed their visits to doctor’s office.

In the quarter, biosimilars revenues decreased 7% year over year to $172 million due to lower sales of Imraldi as well as Benepali. Samsung Bioepis, the joint venture between Biogen and Samsung BioLogics, markets three anti-TNF biosimilars in the EU — Flixabi (a biosimilar referencing J&J [JNJ]/Merck’s Remicade), Benepali (a biosimilar referencing Amgen/Pfizer’s Enbrel) and Imraldi (a biosimilar referencing AbbVie’s Humira).

Imraldi generated sales of $45 million in the quarter, down 5% year over year. Benepali recorded sales of $106 million in the quarter, down 12% year over year. Flixabi sales of $21 million rose 23% year over.

Research and development (R&D) expenses rose 18% year over year to $564 million due to $125 million license fee related to Biogen’s collaboration with Sangamo Therapeutics SGMO. Selling, general and administrative (SG&A) expenses were flat year over year at $555 million.

2020 Guidance

Biogen raised its earnings guidance for the year while slightly lowering its sales expectations. Revenues in 2020 are now expected in the range of 13.8-$14.2 billion versus $14-$14.3 billion expected previously. Earnings per share are now expected between $34.00 and $36.00 per share versus $31.50 and $33.50 previously.

Adjusted R&D costs are expected to be 16% to 17% of total revenues versus 15% to 16% expected previously. Adjusted SG&A costs are expected in the range of 17.5% to 18.5% of total revenues versus 19.5% to 20.5% guided previously. Adjusted tax rate guidance is 18% to 19%.

Our Take

Biogen beat estimates on both counts. Though Biogen slightly lowered its sales outlook for the year, it raised its earnings expectations. The stock was up 2.5% in pre-market trading. Biogen’s stock has declined 5.6% this year so far against an increase of 11.8% for the industry.

In July, Biogen completed the submission of the biologics license application (BLA) to the FDA, seeking approval of aducanumab for Alzheimer’s disease. If aducanumab is approved by the FDA, it will become the first medicine to be approved to reduce the clinical decline associated with Alzheimer’s disease, opening up a huge market opportunity for Biogen.

Biogen has a Zacks Rank #3 (Hold) currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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