Biogen Looks to 2020

Biogen (BIIB 2.81%) posted solid fourth-quarter earnings on Tuesday, but lackluster 2019 revenue guidance leaves investors twiddling their thumbs waiting for growth from the next big hit from the biotech's drug pipeline.

Check out the latest Biogen earnings call transcript.

Biogen results: The raw numbers

Data source: Biogen.

What happened with Biogen this quarter?

• Sales of multiple sclerosis (MS) drugs were down 1% year over year, with older injectable interferon drugs declining 7%, which was mostly made up for by top-selling oral Tecfidera, which grew 3% year over year. Sales of Tysabri were flat year over year, but that's better than the drug had been doing; for the year, Tysabri sales were down 6% versus 2017.
• Biogen's MS drugs continue to see competition from Roche's Ocrevus, which Biogen fortunately gets a royalty from. Including those royalties, multiple sclerosis revenue was up 2% year over year.
• Sales of spinal muscular atrophy drug Spinraza, which Biogen developed with Ionis Pharmaceuticals (IONS 0.18%), increased 30% year over year, but were flat quarter over quarter. U.S. sales were up 5% quarter over quarter as the company pushed into treating adults (more than 50% of new patients in the fourth quarter were adults), but sales outside the U.S. decreased 4% versus the third quarter. The number of international patients is still increasing -- up 18% quarter over quarter -- but the price per patient decreased compared with the third quarter.
• Biosimilars continue to grow at a nice clip, up 28% year over year thanks to the launch of Imraldi, a biosimiar to Humira, but the class remains a small fraction of Biogen's overall business.
• On the pipeline front, Biogen released promising clinical trial data for Alzheimer's drug BAN2401 with partner Eisai, and for BIIB067 (for a form of familial amyotrophic lateral sclerosis) with Ionis Pharmaceuticals. Both drugs are pushing into later-stage clinical development. Biogen also submitted a marketing application to the Food and Drug Administration for multiple sclerosis drug Vumerity with Alkermes (ALKS 0.55%).
• The year-ago quarter had a large tax bill, so adjusted EPS is the best way to compare earnings year over year. In addition to the growing revenue, EPS also benefited from the repurchase of 14.8 million shares for $4.4 billion in 2018.

Image source: Getty Images.

What management had to say

Full-year MS revenues including Ocrevus royalties were $9.1 billion, demonstrating resilience. The number of patients on our MS products globally remained relatively stable versus the prior year. Importantly, we continue to see improving trends for our MS business in the U.S. on a year-over-year basis.

-- CFO Jeffrey Capello

The key words there are "resilience" and "stable." In the face of competition, anything other than declines is a good trend.

Capello also explained the quarter-over-quarter decline in international sales of Spinraza: "Despite strong overall patient growth, fourth-quarter ex-U.S. Spinraza revenues decreased slightly versus the third quarter due to a combination of lower volumes in certain markets due to load and dose dynamics, the timing of shipments in certain distributor markets, and pricing dynamics in certain markets."

Let's break down those reasons:

Load and dose dynamics: Patients get more doses at the beginning of treatment (the load) before switching to the regular maintenance dose, so the revenue per patient declined for all the patients who switched to the maintenance regimen between the third and fourth quarter.

Timing of shipments in certain distributor markets: This is out of Biogen's control and should even out in the end, so it's not something to worry about.

Pricing dynamics in certain markets: Of the three, this is clearly the biggest worry if countries are setting lower prices for Spinraza, but management didn't go into greater detail.

Looking forward

Management is looking for revenue in the $13.6 billion to $13.8 billion range, up less than 2% at the midpoint. On the bottom line, adjusted earnings per share are expected to come in between $28 and $29, up 8.8% at the midpoint. Compared with last year, when revenue and adjusted EPS were up 10% and 20%, respectively, it's hard to get excited about the 2019 guidance.

Nevertheless, the guidance should be enough to hold investors' interest as they wait for the pipeline to develop, with the biggest data release coming from Biogen's lead Alzheimer's drug aducanumab. That data -- from a pair of phase 3 studies -- is supposed to be presented in early 2020. There's potential for an interim analysis between now and then, but management is keeping mum on whether investors should expect one.