Biogen (BIIB) earnings preview: Will stock bounce back after Q3 report?

The market value of pharma giant Biogen, Inc. (NASDAQ: BIIB) declined by a third in March when the stock suffered a heavy blow after the company discontinued an advanced-stage clinical trial on its Alzheimer’s drug candidate. The stock is yet to recover from the multi-year lows.

Biogen is scheduled to release its third-quarter results on October 22 at 6:50 am ET. It is widely estimated that revenues grew about 3% year-over-year to $3.54 billion in the September-quarter. The earnings forecast is $8.27 per share, up 12% from last year.

MS Portfolio Leads

Royalties from Ocrevus, the popular multiple sclerosis (MS) drug from Swiss firm Roche, will remain a key contributor to revenue growth in the to-be-reported quarter, as they did in the June-quarter. At the same time, the growth of Ocrevus is not good news for Biogen’s Tysabri, which is facing stiff competition from the former. At the post-earnings conference call, the management will likely apprise the stakeholders about the latest trend, especially in the wake of Novartis (NVS) introducing its oral MS medicine Mayzent.

Of late, the oral formulations for multiple sclerosis have been denting the sales of the conventional variants, which will likely weigh on interferon, which accounts for about a fourth of Biogen’s total MS revenue.

Stable Market

The steady increase in new prescriptions for Tecfidera in the US, Biogen’s top-selling multiple sclerosis drug, will also have a positive effect on the top-line. The impact of pricing issues in the non-US markets will likely be offset by the uptick in sales in those regions. Biosimilars is another promising segment that has witnessed steady improvement, especially after the introduction of Imraldi for the treatment of rheumatoid arthritis.

Also see: Amgen to take over Celgene’s OTEZLA for $13.4B

When it comes to bottom-line performance, margins should get a boost from lower research and development expenses since the company has discontinued the studies on its Alzheimer’s candidates elenbecestat and aducanumab. The market will be eager to know the management’s views of the the failed drug development programs and future plans to overcome the setback.

Low Costs Lift Q2 EPS

In the June-quarter, earnings benefited from a sharp decline in costs, mainly those related to research and development. All the components of the business registered growth in the second quarter, lifting the top-line by 8% to $3.6 billion. That translated into a 58% surge in earnings to $9.15 per share.

Related: Biogen Q2 2019 Earnings Conference Call Transcript

Biogen shares plunged to a six-year low this week, continuing the downtrend that started six months ago. The stock lost about 31% so far this year.

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