Biogen Inc. BIIB, a well-known name in the multiple sclerosis (MS) market, will be reporting third-quarter 2016 earnings on Oct 26, before market open.Last quarter, the company delivered a positive earnings surprise of 11.09%.
Biogen’s performance has been pretty impressive, with consistent positive surprises. The average earnings beat over the last four quarters is 11.39%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Since the emergence of the first progressive multifocal leukoencephalopathy (PML)-related death in a patient on oral MS drug, Tecfidera, investor focus has been on its performance.
Biogen is working on growing Tecfidera sales. Tecfidera demand is expected to remain relatively stable in the U.S. in the quarter. Outside the U.S., Tecfidera’s performance in Germany will remain in focus.
While Tysabri should remain on a stable trajectory, the number of patients using Avonex and Plegridy combined will continue to decline as patients move toward oral treatments.
Zinbryta is expected to contribute modestly to revenues in the U.S. and EU. Zinbryta was launched in collaboration with AbbVie Inc. ABBV in August.
Meanwhile, Biogen intends to spin off its hemophilia business in early 2017. The new company will be named Bioverativ and will focus on the discovery, research, development and commercialization of treatments for hemophilia and other blood disorders.
Head count reduction and restructuring initiatives announced last year are expected to benefit operating expenses by about $250 million this year.
Focus on Call: Investor focus on the third-quarter call will remain on Tecfidera’s scrip trends, news regarding additional PML cases, pipeline progress and acquisition plans.
Earnings Whispers
Our proven model does not conclusively show that Lilly is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is -1.41% as the Most Accurate estimate stands at $4.90 while the Zacks Consensus Estimate is pegged higher at $4.97.
Zacks Rank: Lilly’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Some stocks in the large-cap healthcare sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Amgen Inc. AMGN, which is slated to report results on Oct 27. The company has an Earnings ESP of +1.79% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Novartis AG NVS with an Earnings ESP of +0.84% and a Zacks Rank #3. The company is scheduled to release results on Oct 25.
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