Biogen (BIIB) Q2 Earnings: Will The Stock Disappoint?

Biogen Inc. (NASDAQ:BIIB) , a well-known name in the multiple sclerosis (MS) market, will be reporting second quarter 2016 earnings on Jul 21, before the market opens.

Biogen has consistently surpassed expectations over the last four quarters with an average earnings surprise of +9.54%.

Let’s see how things are shaping up for the second quarter.

Will Tecfidera’s Performance Improve?

Since the emergence of the first progressive multifocal leukoencephalopathy (PML)-related death in a patient on oral MS drug, Tecfidera, investor focus has remained on the performance of the drug.

Biogen is working on growing Tecfidera sales and had launched a TV campaign to increase patient awareness about MS and Tecfidera. Although the company said that it helped increase awareness, Biogen does not intend to purchase additional TV spots beyond mid-2016. The company will, however, continue with its marketing efforts across other print and digital channels.

Tecfidera demand is expected to remain relatively stable in the U.S. 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.

Profit share for Rituxan and Gazyva will also decline given FDA approval for Gazyva for Rituxan-refectory indolent non-Hodgkin's lymphoma.

Meanwhile, Biogen intends to spin off its hemophilia business by the end of 2016 or early 2017.

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 second quarter call will remain on Tecfidera’s scrip trends, news regarding additional PML cases, pipeline progress and plans for acquisitions.

What Our Model Indicates

Our proven model does not conclusively show that Biogen is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to announce an earnings surprise. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Biogen is -2.35% since the Most Accurate estimate stands is $4.58 per share, and the Zacks Consensus Estimate is $4.69 per share.

Zacks Rank: Biogen carries a Zacks Rank #3. Biogen’s Zacks Rank #3 when combined with an ESP of -2.35% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Gilead Sciences Inc. (NASDAQ:GILD) has an Earnings ESP of +6.91% and carries a Zacks Rank #2. It will be reporting results on Jul 25.

The Earnings ESP for Novartis AG (NYSE:NVS) is +0.85% and it carries a Zacks Rank #3. The company is scheduled to release results on Jul 19.

Eli Lilly and Company (NYSE:LLY) has an Earnings ESP of +2.35% and a a Zacks Rank #3. The company is scheduled to release results on Jul 26.

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