Biogen Inc. (BIIB) Down 4.8% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Biogen Inc. (BIIB). Shares have lost about 4.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Biogen Inc. due for a breakout? 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.

Q1 Earnings Miss, Sales Beat

Biogen reported first-quarter 2022 earnings per share (EPS) of $3.62, which missed the Zacks Consensus Estimate of $4.41. In the year-ago quarter, Biogen had recorded earnings of $5.34 per share.

Earnings per share were hurt by 76 cents due to approximately $275 million write-off of Aduhelm inventory. Due to restrictions on coverage for Aduhelm in the final NCD, released in April, Biogen has decided to substantially eliminate its commercial infrastructure supporting Aduhelm, retaining minimal resources to support patient access programs, including a continued free drug program for patients currently on treatment in the United States.

Sales came in at $2.53 billion, down 6% on a reported basis (5% on constant currency basis) from the year-ago quarter, hurt by lower sales of Tecfidera and Spinraza. Sales, however, beat the Zacks Consensus Estimate of $2.50 billion.

Product sales in the quarter were $2.1 billion, down 6.6% year over year. Royalties on sales of Roche’s Ocrevus were $252.3 million in the quarter, up 20.5% year over year. Revenues from Biogen’s share of Roche’s drugs, Rituxan and Gazyva declined 18% from the year-ago period to $147.1 million due to biosimilar competition for Rituxan. Other revenues declined 29.2% in the quarter to $66.1 million.

Multiple Sclerosis Revenues

Biogen’s MS revenues were $1.65 billion in the reporter quarter, including Ocrevus royalties, which declined 3% on a reported basis and 2% on a constant currency basis year over year.

Tecfidera sales declined 14.5% to $409.9 million in the quarter as multiple generic products have been launched in the United States. U.S. Tecfidera revenues declined 27.9% to $117.1 million. Outside U.S. revenues decreased 7.6% to $292.8 million hurt by pricing pressure. Biogen expects entry of generic for the drug in European markets during the second quarter, which will likely hurt sales further.

New drug Vumerity recorded $128 million in sales, higher than $124.9 million in the previous quarter. Sales of the drug gained 73.9% year over year.

Total Fumarates (Tecfidera + Vumerity) revenues were $537.9 million in the quarter, down 2.7% year over year.

Tysabri sales rose 3.5% year over year to $520.8 million, benefiting from favorable pricing in the United States that offset the impact of lower volumes. In outside U.S. market, continued patient growth 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 including launch in Europe. 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 $309.6 million, down 22.7% year over year.

Other Products

Sales of Spinraza declined 9% (6% on a constant currency basis) year over year to $472.5 million due to a decrease in demand as a result of increased competition. However, sequentially sales improved 7% in the quarter backed by sequential improvement in ex-U.S. markets and some seasonality dynamics in the United States. Spinraza’s U.S. sales were $163.3 million in the quarter, up 9.8% year over year driven by positive channel dynamics. Biogen said that Spinraza new patient starts are at highest levels in over two years, with a continued slowdown in discontinuations.

In ex-U.S. markets, Spinraza sales declined 16.8% year over year to $309.2 million due to the unfavorable timing of shipments in certain markets, competition and currency headwinds. However, the company saw strong initial uptake in China, which has received national reimbursement.

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 5% year over year (1% in constant currency) to $194 million as increased volumes were offset by the impact of pricing pressure and currency headwinds.

Benepali recorded sales of $114.7 million in the quarter, down 5.8% year over year. Flixabi sales were $22.5 million, down 11.8% year over year. Imraldi sales of $57.1 million declined 1.4% year over year.

In April, Biogen completed the sale of its equity stake in Samsung Bioepis joint venture to partner Samsung Biologics for up to $2.3 billion. Biogen received a payment of $1 billion in cash as part of the sale upon closing. Biogen expects to launch Bioepis in the United States in the coming months. It expects the launch to be gradual with more meaningful revenue contribution starting in 2023.

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

New Alzheimer’s drug, Aduhelm recorded sales of $2.8 million in the first quarter, compared with $1.0 million in the previous quarter.

Research and development (R&D) expenses were $552 million, up 7.4% year over year. Selling, general and administrative (SG&A) expenses gained 6.7% year over year to $635 million including approximately $80 million related to Aduhelm

Biogen did not repurchase any shares in the quarter. Biogen has $2.8 billion remaining under its new share buyback plan of $5 billion as of March 2022.

New Restructuring Initiatives

Following its failure with Aduhelm, Biogen announced a set of near-term operational priorities to drive renewed growth and value creation over time. The initiatives are also believed to result in significant cost savings annually.

The company’s substantial elimination of global commercial infrastructure supporting Aduhelm, along with other new cost reductions, is estimated to result in annualized cost savings of approximately $500 million. This is in addition to the existing cost-saving initiatives, which are also targeting another $500 million in annualized savings, bringing the total expected annualized savings to approximately $1 billion, which is expected to be invested in strategic initiatives over time.

Biogen is also planning to focus on R&D activities with the highest probability of success. The company can accelerate, terminate, divest, or partner certain programs while continuing to evaluate new internal and external opportunities within Biogen’s therapeutic areas of focus and adjacencies. The company is planning to prioritize its R&D activities based on data from two late-stage studies on lecanemab and zuranolone, expected later this year.

The company plans to focus more on emerging international markets, especially China and certain markets in both Latin America and the Middle East, to boost growth. This includes the continued launch of Spinraza in these markets. It is also looking to re-invigorate growth in its biosimilars with its newly-approved biosimilar drug, Byooviz (referencing Lucentis), and other four biosimilar candidates in development.

Biogen will deploy savings from cost-reduction initiatives as well as its cash resources towards strategic initiatives to drive top-line growth as well as to provide returns to its investors through share repurchases.

2022 Guidance

The company reiterated its total revenues as well as earnings guidance for 2022.

Total revenues are expected in the range of $9.7-$10.0 billion in 2022, indicating a decline from 2021 levels. The company expects continued erosion of Tecfidera’s sales in the United States while generics are also expected to be launched in the EU in the second quarter. The launch of generics will erode the drug’s ex-U.S. sales. The guidance also assumes significant erosion of Rituxan in the United States due to biosimilar competition.

Adjusted earnings guidance was maintained in the range of $14.25-$16.00 despite the 76 cents impact of Aduhelm inventory write-off in the first quarter and potential currency headwinds. Biogen expects the additional cost measures and improved base business performance to make up for these negative impacts.

Currency headwinds are expected to hurt full-year 2022 revenues by approximately $122 million and adjusted EPS by 35 cents.

Adjusted R&D expense is expected in the range of $2.2 billion to $2.3 billion. However, the company anticipates a decrease in adjusted SG&A costs in 2022 to reflect favorable impact of initial implementation of the new cost-reduction measures. It now expects adjusted SG&A to between $2.3 billion and $2.4 billion, compared with $2.5 billion and $2.6 billion previously. The cost-reduction initiatives are expected to primarily impact third-quarter results. Adjusted tax rate is expected to be between 15.5% and 16.5%.

The reduction in revenues from Tecfidera and Rituxan, both high-margin products, as well as Aduhelm inventory write-offs are expected to reduce Biogen’s gross margin percentage in 2022.

Search for New CEO

Biogen announced that a search has begun for a new chief executive officer (CEO). The present CEO, Michel Vounatsos will continue in his position until his replacement is found.

Pipeline Update

Biogen and Eisai plan to complete the rolling submission for lecanemab under the accelerated approval pathway in the United States in the second quarter of 2022. However, 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.


How Have Estimates Been Moving Since Then?

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


VGM Scores

At this time, Biogen Inc. has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


Performance of an Industry Player

Biogen Inc. belongs to the Zacks Medical – Biomedical and Genetics industry. Another stock from the same industry, Gilead Sciences (GILD), has gained 4.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Gilead reported revenues of $6.59 billion in the last reported quarter, representing a year-over-year change of +2.6%. EPS of $2.12 for the same period compares with $2.08 a year ago.

Gilead is expected to post earnings of $1.52 per share for the current quarter, representing a year-over-year change of -18.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Gilead. Also, the stock has a VGM Score of A.


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