Biotech company, Biogen BIIB, reported third quarter 2015 earnings per share of $4.48, well above the Zacks Consensus Estimate of $3.83 and 18.2% above the year-ago earnings.
Sales came in at $2.778 billion, beating the Zacks Consensus Estimate of $2.663 billion and increasing 10.6% from the year-ago period. Currency negatively impacted revenues by $63 million.
The Quarter in Detail
Third quarter Tysabri revenues decreased 4.2% to $480 million (U.S. $284 million, ex-U.S. $196 million) from the year-ago period.
Combined interferon revenues (Avonex and Plegridy), in the third quarter, were $785 million (U.S. $538 million, ex-U.S. $247 million), up 5.4% from the year-ago period and 14% sequentially. The company attributed the 18% sequential improvement in U.S. revenues to the rebalancing of an inventory reduction in the wholesale channel in the second quarter of 2015. The rebalancing boosted revenues by $40 million. Avonex revenues declined 7.6% from the year-ago period to $685.1 million.
Plegridy contributed $99.7 million to third quarter 2015 revenues, up from $74.5 million in the second quarter of 2015.
Rituxan and Gazyva related revenues were $337 million in the third quarter, up 15.8% from the year-ago period.
Oral multiple sclerosis (MS) drug Tecfidera grew 19.1% from the year-ago period to $937 million. This included U.S. sales of $754 million and EU sales of $183 million. Sales grew 6% on a sequential basis. U.S. sales were positively impacted by an increase of inventory in the specialty pharmacy channel. Biogen is working on growing Tecfidera sales and is pursuing commercial initiatives including new direct to consumer marketing programs.
Alprolix and Eloctate, Biogen’s recently launched hemophilia treatments, recorded revenues of $66 million and $91 million, respectively, showing growth from second quarter 2015 revenues of $54 million and $74 million, respectively.
11% Job Cuts
Under its corporate restructuring plan, Biogen expects to discontinue several pipeline programs and expects an 11% reduction in workforce. The restructuring is expected to generate annual cost savings of about $250 million. The savings will be reinvested in key focus areas including increased sales efforts for Tecfidera and the advancement of high potential pipeline candidates being developed for Alzheimer’s disease (aducanumab – phase III, BAN2401 – phase II, E2609 – phase II), multiple sclerosis (anti-LINGO – phase II), and spinal muscular atrophy (SMN-Rx – phase III).
A major part of the job cuts will be completed by year end. Meanwhile, discontinued programs include the phase III program evaluating Tecfidera in secondary progressive MS and anti-TWEAK for lupus nephritis.
Ups View
Biogen raised its revenue and earnings outlook for 2015 and now expects earnings of $16.20 – $16.50 per share on revenue growth of 8% – 9%. Earlier, the company had guided towards earnings of $15.50 – $15.95 per share on revenue growth of 6% – 8%. The Zacks Consensus Estimate currently stands at $15.89 per share.
While Biogen continues to expect R&D expense of approximately 19% – 20% of total revenue, the company now expects SG&A expense of approximately 19% – 20% of total revenue, down from the earlier range of 20% – 21%.
Our Take
Biogen’s third quarter results were strong with the company surpassing both earnings and revenue expectations. The stock, which has taken a beating over the last few months on a lowered outlook and a slowdown in Tecfidera growth rate as well as overall concerns regarding pricing in the biotech sector, should recover given its raised outlook and the improving sales of Tecfidera.
Meanwhile, new products like Plegridy, Eloctate and Alprolix should continue doing well.
Biogen is a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the health care sector include Amgen Inc. AMGN, Aegerion Pharmaceuticals, Inc. AEGR and Actelion Ltd. ALIOF. While Amgen is a Zacks Rank #1 (Strong Buy) stock, Aegerion and Actelion are Zacks Rank #2 (Buy) stocks.
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