Biogen (BIIB) Q4 Earnings Miss, Sales Top, 2018 View Upbeat

Biogen Inc. (NASDAQ:BIIB) reported fourth-quarter 2017 earnings per share of $5.26, which missed the Zacks Consensus Estimate of $5.44 by 3.3%. Earnings however rose 4% year over year as higher revenues made up for higher operating costs.

Sales came in at $3.31 billion, up 15% from the year-ago period. Sales also surpassed the Zacks Consensus Estimate of $3.07 billion by 7.6%.

We remind investors that last year Biogen spun off its hemophilia business into a new company called Bioverativ (NASDAQ:BIVV) . Sanofi (NYSE:SNY) , earlier this week, announced that it has offered to buy Bioverativ for $11.6 billion.

Quarter in Detail

Biogen’s multiple sclerosis (MS) revenues were $2.3 billion (up 5%) in the quarter including approximately $77 million in royalties on the sales of Roche’s (OTC:RHHBY) MS drug, Ocrevus. Per a deal with Roche, Biogen is entitled to receive royalties on U.S. sales of Ocrevus.

In the quarter, MS sales in the United States included inventory buildup of $40 million, which benefited revenues.

Oral MS drug, Tecfidera’s sales increased 7% year over year and 1% sequentially to $1.08 billion. The other MS drug, Tysabri’s sales decreased 2% year over year and 1% sequentially to $463 million.

Combined interferon revenues (Avonex and Plegridy) in the fourth quarter were $645 million, down 6% from the year-ago period. Avonex revenues declined 8% from the year-ago period to $520 million. Plegridy contributed $125 million to fourth-quarter 2017 revenues, flat year over year as well as sequentially.

U.S. Interferon revenues are experiencing declining trends due to patients transitioning to other oral MS therapies as well as due to higher discounts and allowance.

Zinbryta, launched in collaboration with AbbVie, contributed $12 million to revenues in the fourth quarter compared with $14 million in third-quarter 2017.

Newly launched Spinraza brought in revenues of $363 million in the fourth quarter, registering growth of 34% sequentially.

Spinraza U.S. sales were $218 million in the fourth quarter, much better than $198 million in the third quarter. Inventory levels were flat in the fourth quarter. In ex-U.S. markets, Spinraza recorded sales of $144 million, significantly higher than $73.3 million in the third quarter. The company said that Spinraza international revenues were mainly from Germany, Turkey, and Japan.

In the quarter, Biogen recorded biosimilar revenues of $122 million compared with $101 million in the third quarter.

Revenues from Anti-CD20 therapeutic programs, which include Biogen’s shares of Rituxan and Gazyva operating profits, climbed 6% from the year-ago period to $338 million.

As expected, operating expenses were higher in the fourth quarter as the company continues to invest in its strategic priorities. R&D spend rose 11% year over year and 32% sequentially to $588 million, while SG&A spend rose 15% year over year and 28% sequentially to $554 million.

2017 Results

Full-year 2017 sales of $12.27 billion topped the Zacks Consensus Estimate of $12.04 billion. Sales rose 7% year over year. The top line, excluding hemophilia revenues, grew 15% year over year.

Adjusted earnings for 2017 were $21.81 per share, falling short of the Zacks Consensus Estimate of $21.98. Earnings rose 8% year over year.

2018 Outlook

Biogen guided earnings in the range of $24.20 and $25.20 per share, above the Zacks Consensus Estimate of $24.18 per share. Revenues are expected in the range of $12.7-$13.0 billion in 2018. The Zacks Consensus Estimate is pegged at $12.72 billion.

While R&D expenses are expected to be approximately 16% to 17% of total revenues in 2018, SG&A is expected in the range of 15% to 16%.

Our Take

Biogen had a mixed fourth quarter as it beat estimates for earnings but missed the same for sales. Higher MS sales and strong Spinraza performance led to the strong top-line performance in the quarter. The revenue beat and the upbeat outlook for 2018 led shares to rise more than 3% in pre-market trading.

Biogen’s shares have risen 19.6% in the past year, better than the industry’s growth of 9.6% in the same time frame.

Biogen has a strong portfolio of MS products. However, the overall growth trends in the multiple sclerosis market are gradually slowing down. Tecfidera’s U.S. patient demand has been declining due to increasing competition from oral medicines and a slowdown in the overall MS market. As competition in the MS market intensifies, Biogen is diversifying beyond MS to other areas like Alzheimer's, Parkinson's and stroke, among others. The company said it has made seven additions to its neuroscience pipeline in 2017 and expects several important data readouts in 2018.

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

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