What's In Store For Biogen (BIIB) This Earnings Season?

Biogen Inc. (NASDAQ:BIIB) , a well-known name in the multiple sclerosis (MS) market, will report first-quarter 2017 results on Apr 25, before the market opens. Last quarter, the company delivered a positive earnings surprise of 1.41%.

Biogen’s shares rose 4% this year so far while the Zacks classified Biomed-Genetics industry recorded an increase of 2.9%.

Biogen’s earnings performance has been pretty impressive so far, having delivered back-to-back positive surprises. The average earnings beat over the last four quarters is 5.86%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

At the fourth quarter 2016 conference call, management had informed that U.S. market share of its oral MS drug, Tecfidera, declined slightly in 2016 with increasing competition from oral medicines and slowdown in the overall MS market. However, Tecfidera is seeing patient growth in ex-U.S. markets. Sales of the drug also declined sequentially in the fourth quarter of 2016. Sales of another MS drug, Tysabri also declined in the quarter.

Biogen expects relatively stable demand for both Tecfidera and Tysabri in 2017 as patient growth in ex-U.S. markets offsets the modest decline in the U.S. It remains to be seen if sales trends of both these drugs improve in the first quarter of 2017.

Meanwhile, the combined number of patients using Avonex and Plegridy will continue to decline as patients shift to other oral MS therapies or other high-efficacy products.

Zinbryta, launched in collaboration with AbbVie Inc. (NYSE:ABBV) in Aug 2016, is expected to contribute to revenues in the U.S. and the EU. The drug is also benefiting from increased use of high-efficacy products.

We remind investors that FDA approved Biogen and partner Ionis' Spinraza for spinal muscular atrophy in Dec 2016. Notably, Spinraza is the first approved treatment for the disease, which will allow it to address an untapped market, thereby offering the company a huge boost. Spinraza, which added $5 million to the top line in the fourth quarter of 2016, should contribute further to sales in the first quarter of 2017.

At the fourth quarter conference call, the company warned of possible logistics and access-related hurdles for Spinraza launch. We expect management to provide an update on the issue at the latest conference call.

Meanwhile, headcount reduction and restructuring initiatives are expected to continue to lower operating expenses. Cost of goods sold, as a percentage of sales, are expected to rise in 2017 due to higher royalty payments related to the sales of Spinraza.

Investor focus on the fourth-quarter call will remain on Tecfidera’s scrip trends, launch progress on Spinraza, pipeline progress and acquisition plans.

Earnings Whispers

Our proven model does not conclusively show that Biogen is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is -1.80% as the Most Accurate estimate stands at $4.90 while the Zacks Consensus Estimate is pegged higher at $4.99. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Biogen’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks in the pharmaceuticals sector that have both a positive ESP and a favorable Zacks Rank are:

Amgen, Inc. (NASDAQ:AMGN) is scheduled to release results on Apr 26. The company has an Earnings ESP of +1.99% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Celldex Therapeutics, Inc. (NASDAQ:CLDX) has an Earnings ESP of +7.14% and a Zacks Rank #3. The company is expected to release results early next month.

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