Biopharma company Biogen Inc (NASDAQ:BIIB) is on the rise today, with BIIB stock up some 6% as the company finally injected some optimism into what has been a shoddy 2016.
Biogen earned $4.79 per share, or $1.1 million worth of operating income, in its recently completed quarter, on revenue of $2.9 billion. Analysts were only calling for a profit of $4.70 per share of BIIB stock, and revenue of $2.8 billion. The company reported earnings of $4.22 per share in the same quarter of 2015, when it posted sales of $2.29 billion, translating into respective increases of 13% and 26%.
It was the eighth time in the past nine quarters that Biogen topped earnings estimates.
Biogen Earnings Lifted by Tecfidera
Biogen, primarily focused on multiple sclerosis therapies, saw its flagship MS drug Tecfidera generate $987 million worth of revenue last quarter, versus $883 million in the same quarter a year earlier. Tecfidera sales were up 4% on a sequential basis. Biogen controls 47% of the global multiple sclerosis market, worth about $20 billion per year.
CEO George A. Scangos, Ph.D., commented on last quarter’s numbers:
“During the second quarter we saw solid performance across our commercial business, as a growing number of patients benefited from our broad MS portfolio, hemophilia therapies, and recently launched biosimilar. Revenue strength coupled with thoughtful management of expenses helped drive healthy earnings growth for the quarter. As a result, we have raised our financial guidance for the full year. Our Board has also authorized a $5 billion share repurchase program. We believe this allows us to return capital to shareholders, while leaving ample room for strategic flexibility.”
The company also announced Scangos would be stepping down once a suitable replacement was found.
Over the prior 12 months, BIIB stock had lost 33% of its value … a selloff ultimately spurred by disappointing Tecfidera sales growth during the second quarter of 2015. The treatment was introduced in 2013, and was well-received at the onset, with revenue soaring to $3.6 billion in 2015. Its growth pace began to slow in mid-2015, however.
Although never explicitly introduced as a “turnaround plan,” the company began to refocus and revamp to maximize sales of Tecfidera and its other MS drugs, which include Tysabri, Fampyra and Avonex.
One aspect of this overhaul included a consumer television advertising campaign, which proved effective. In the first quarter of the year, Tecfidera sales grew 15% on a year-over-year basis for the three-month period, reaching $946 million. Q2’s marked increase suggests the effort was and still is getting traction. The rest of the company’s multiple sclerosis portfolio saw similar sequential and year-over-year growth.
Biogen is also aiming to sell off of its hemophilia division, represented by drugs Alprolix and Eloctate.
Though only a small portion of the company’s revenue mix, it has been an impressive portion. Sales between the two hemophilia drugs were up 88% on a year-over year basis in Q1, and collectively grew 58% in the recently completed quarter.
Sales growth, however, has been more stagnant for its hemophilia portfolio of late. In Q1, they only grew 6% sequentially, and during Q2, they were only up 12% from Q1’s tally. Given the muted growth and minor contribution the division makes to the company’s top and bottom lines, BIIB feels it would be better served by committing its hemophilia time and resources to MS opportunities. Its MS portfolio makes up 80% of the company’s total revenue.
Other observers believe the company’s hemophilia business is one worth keeping, since sales of both drugs are still growing, and the portfolio is already in place.
BIIB Stock: Looking Ahead
Analysts’ revenue outlooks for the remainder of 2016 and all of 2017 had been lackluster, largely reflecting a slowdown in the sales of its flagship drug Tecfidera. Forecasts were calling for, on average, a top line of $11.3 billion in sales this year, growing to $11.9 billion next year; the outlook suggests revenue growth of about 5% each year.
While the new sales 2016 guidance $11.2 billion and $11.4 billion for 2016 is in line with estimates, the 5% pre-market gain BIIB shares made indicates the market is enthusiastic about the results and outlook, perhaps believing the targets will be easy to beat.
BIIB now trades at a below-average P/E of 16.1. And, based on the mid-point of its revised 2016 income guidance of between $19.70 and $20.00 per share — versus only $17.01 last year and analyst estimates of $18.96 for this year — the stock is currently valued at a projected full-year P/E 13.9.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.