Investors have very little to look forward to when Biogen Inc. (NASDAQ: BIIB) reports its quarterly results on July 23 after the market closes. Biogen stock cratered in late March when its potential Alzheimer’s treatment, aducanumab, failed. What, if anything, should investors look for in Biogen’s upcoming quarterly report?
Biogen’s Positive Developments
Biogen is trying to pick itself up months after Biogen stock got hammered back in March, sinking from $320 to as low as $220 after BIIB and Eisai terminated two trials of their Alzheimer’s drug.
Still, BIIB’s MS franchise remains a key player in its long-term strategy. The unit brings in over $9 billion of annual revenue. Biogen also launched Spinraza, its spinal muscular atrophy product, and has plans to grow its biosimilars products. Its earnings per share has been growing at a compound annual growth rate of 15%.
Biogen’s consistent performance is keeping BIIB stock in a tight trading range between $225 and $240. With Biogen stock trading at a price-earnings ratio of less than ten, markets are not assigning any premium for the company’s long-term growth prospects.
Higher R&D Costs Expected
To maintain its focus and leadership in neuroscience, Biogen is investing a great deal of capital in R&D. The cycle of researching, discovering, and developing and commercializing products will play out over several years. The company has three franchises: MS is its core business, while it also has Spinraza and biosimilars.
BIIB’s efforts to grow beyond its core business will widen its addressable market, but does carry some risk. Commercializing more products takes time, money, and resources, and the sales of its newer products may initially lag those of its older ones. Still, Biogen is tackling the unmet needs of patients suffering from neurological diseases.
Product Portfolio
Biogen has 26 programs, including four growth areas and four emerging ones. This large scope diversifies the company and lessens its reliance on blockbusters. In the next 18 months, it will have over ten data readouts. Any positive clinical results should gain investors’ attention and might lift Biogen stock.
Quarterly Earnings Expectations
12 analysts who cover BIIB stock have an average Q2 EPS estimate of $7.40, per Tipranks.
That is sharply higher than the $5.80 EPS that BIIB reported for Q2 of 2018. The global launch of Spinraza’s likely boosted BIIB’s revenue last quarter. The company said that the product is meeting unmet medical needs in the U.S. and in overseas markets.
In 2018, BIIB generated $6.2 billion of cash flow from its operations. Based on that metric, Biogen stock has a future cash flow value of $319, (per simplyWallSt) sharply higher than its recent price of $233.
But nine analysts have a “hold” on Biogen stock and just two call BIIB stock a “buy.” Analysts’ average price target on BIIB stock is $248.
The Bottom Line on Biogen Stock
Biogen, like most other biotechnology companies, is facing increased competition. But Biogen earnings on July 23 should demonstrate its resiliency. As mentioned above, its MS franchise generates $9 billion of annual revenue, but the annual global addressable MS treatment market is $20 billion, suggesting the franchise can grow further.
Meanwhile, as Spinraza’s sales grows, the owners of Bioogen stock will focus on the long-term growth prospects of the drug. Biogen earnings will enable investors to assess whether Biogen’s MS franchise and its Spinraza drug are on the right track.
As of this writing, the author did not hold a position in any of the aforementioned securities.
