Biogen Posts Solid Earnings as the Biotech Waits for Clinical Trial Data

Biogen (BIIB 1.06%) reported solid second-quarter earnings on Tuesday, buoyed by a doubling in sales of its spinal muscular atrophy drug Spinraza, which was developed with Ionis Pharmaceuticals (IONS 0.38%). After a strong first half of the year for the company, management raised its full-year revenue guidance.

Biogen results: The raw numbers

Data source: Biogen. EPS = earnings per share.

What happened with Biogen this quarter?

• Revenue from multiple sclerosis drugs, including royalties on Ocrevus, were down 2% year over year, but inventory difference affected the comparison. Adjusting for inventory dynamics, revenue was flat year over year.
• Sales of Spinraza increased 108% year over year with most of that growth coming from outside the U.S. In fact, ex-U.S. revenue actually exceeded U.S. revenue for the first time. The number of adult patients treated with Spinraza increased 20% quarter over quarter, but management estimates that it's still only treating 10% of adults with spinal muscular atrophy, suggesting more growth available.
• On the Alzheimer's front, the company disclosed that BAN2401, which is being developed in partnership with Eisai, helped patients taking the drug for 18 months in a phase 2 study. The two companies' more-advanced Alzheimer's drug aducanumab recently completed enrollment for two phase 3 studies.
• Biogen has entered multiple business-development deals to boost its pipeline recently. These include an option to acquire a phase 2 compound for acute ischemic stroke called TMS-007, a pair of drugs from AliveGen that may help multiple neuromuscular indications including spinal muscular atrophy, another deal with longtime partner Ionis Pharmaceuticals to develop antisense drugs for neurological diseases, and increasing the ownership in its biosimilar joint venture Samsung Bioepis, to 49.9%.
• During the quarter, the company repurchased $2.75 billion worth of shares.

Image source: Getty Images.

What management had to say

Michael Ehlers, executive VP and head of research and development, highlighted the company's progress to find the next Spinraza to keep its revenue growing in the face of stagnant multiple sclerosis sales. "Since the beginning of 2017," he said, "we have meaningfully expanded our pipeline by adding or advancing 14 clinical stage programs."

Deals for late-stage or already approved products would add to the revenue line faster than Biogen's recent early-stage deals, but CFO Jeff Capello pointed out they're not easy to do:

The challenge is, as I think as everybody can appreciate, is we have to find later-stage deals where there is a good scientific rationale, strong intellectual property, good synergies from a commercial and manufacturing perspective, and it makes sense financially. Those are a lot of wickets to get through to kind of get a deal through.

Looking forward

Management increased 2018 revenue guidance to a range of $13.0 billion to $13.2 billion from a previous guidance of $12.7 billion to $13.0 billion. On the bottom line, management is looking for adjusted earnings of $24.90 to $25.50 in 2018, an increase from the prior guidance range of $24.20 to $25.20. To hit those goals, Biogen needs to stabilize sales of its multiple sclerosis franchise -- and lapping the launch of Ocrevus should help -- as well as continue to increase sales of Spinraza. This shouldn't be too difficult thanks to growing use in adults and continued expansion of reimbursement, including pending reimbursement in seven additional countries.

Longer term, investors should be focused on Biogen's pipeline. Beyond Alzheimer's, which is arguably the biggest opportunity but also carries the biggest risk, Biogen expects data from clinical trials for drugs treating multiple sclerosis, neuropathic pain, ophthalmology, and ALS in the coming year.