Biogen Inc (NASDAQ:BIIB) shares have been struggling for nearly a year now. The second-quarter 2015 numbers — posted on July 24 of last year — prompted a 22% setback for BIIB stock that same day, which has given up a total of 33% since the fateful day the implosion started.
The prod for the pullback was disappointing sales of its multiple sclerosis drug Tecfidera, forcing the company to unexpectedly and drastically lower its then-full-year guidance for 2015.
Will the anniversary of that news and subsequent meltdown lead to a reversal of fortune? We’re about to find out.
On Thursday morning, Biogen will release its second-quarter numbers and presumably update its guidance.
The BIIB stock investors know and love today, though, isn’t the same one that’s been punishing them for the past year.
Biogen Earnings Outlook
As of the most recent look, analysts collectively expect Biogen to post earnings of $4.68 per share on revenue of $2.8 billion. Both would be notably higher than the earnings of $4.22 per share of BIIB and sales of $2.59 billion achieved in the comparable quarter a year earlier.
For the record, Biogen usually tops earnings estimates, and the bar is set reasonably low for Q2.
That being said, the reason analyst outlooks for the remainder of 2016 and all of 2017 are lackluster largely stems from the slowdown in the sales of its flagship drug Tecfidera, as well as a recent decision to spin off its hemophilia business.
That may, in the end, be the best decision for the top and bottom line though. Its hemophilia division was proving to be a distraction, and with it out of the way, Biogen’s doubling-down on neurodegenerative diseases may well turn the company into a juggernaut in that sliver of the biopharma market.
Better to be outstanding at one thing than mediocre at several. The outlook may underestimate how much better Biogen could do without the distraction of a non-core business.
3 Things for Biogen Owners to Mull
While there are several factors in play at any given time for any biotech, only a handful of them are capable of pushing them around. For BIIB, these are the biggest forces that could help or hurt the stock’s price.
1. Tecfidera: Above all else, if Biogen is to thrive and if BIIB stock is to advance, its MS drug needs to do well.
But wasn’t that the product that kick-started the trouble almost a year ago? Yes, it was, but Biogen has turned up the heat on its marketing of the therapy. And, it’s working. You may recall from the company’s first-quarter numbers that the drug’s sales were up 15% on a year-over-year basis then, reaching $946 million.
A television ad campaign was a key driver for that growth, but if it works, it works. The response was at least strong enough to prompt a 16% increase in the price of Tecfidera in Q2.
2. Sale of Hemophilia Business: News that Biogen was looking to shed its hemophilia division has elicited mixed responses. Some observers are cheering the decision, acknowledging it’s not one of the company’s core competencies, and may actually be preventing Biogen from doing all it can do on the MS front. Others think the business — mostly drugs Alprolix and Eloctate — is one worth keeping, since sales of both drugs are growing.
Each side of the table makes valid points. The impact on the value of Biogen stock, then, may be whether the market decides to see the glass as half-empty or half-full. Investors should monitor the rhetoric closely.
3. Competition: Finally, though a somewhat obvious reality, if Biogen decides to continue turning into a one-trick pony, it better make sure it has the best pony in the show. So far, Tecfidera seems to have retained that title (Biogen wins nearly half the world’s MS business) but plenty of other players are eyeing the $20 billion multiple sclerosis market.
One of the ones to watch is Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY). It just pushed Ocrevus (ocrelizumab) into a priority review with the FDA. It doesn’t yet compete head-to-head with Tecfidera, taking aim at primary progressive multiple sclerosis, or PPMS — where nobody competes — but it does show that Roche is serious about getting into the MS arena.
Others are following.
Bottom Line for BIIB Stock
Not that Biogen didn’t deserve the wake-up call it got a year ago, but the bears may have excessively punished the company’s stock over the course of the past twelve months. The company has fixed a great deal of what was broken in the meantime, but so far, the market hasn’t been impressed.
Thursday’s news may be what jolts investors back to their senses for a relatively inexpensive BIIB, which now trades at a below average price-to-earnings ratio of 16. The projected growth outlook shouldn’t be tough to meet, or beat.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.