Biogen Raises Guidance as It Looks to the Pipeline for Growth

Biogen (BIIB 4.56%) put up relatively impressive sales numbers in the second quarter, with earnings per share growing like gangbusters as the drugmaker cut expenses and repurchased shares to boost the bottom line.

Biogen results: The raw numbers

Data source: Biogen.

What happened with Biogen this quarter?

• Sales of multiple sclerosis drugs, including royalties on Roche's Ocrevus, were up 3% year over year. Top-selling Tecfidera was up 6%, while older interferon medications continued to slip, falling 11% year over year. Sales of Tysabri, which is relatively old but still quite effective, rose 2%.
• Sales of spinal muscular atrophy drug Spinraza, which was developed with Ionis Pharmaceuticals (IONS 1.46%), were up 15% year over year. Sales fell 6% from the first quarter, which management blamed on patients switching from the higher loading dose to the lower maintenance dose as well as a pricing adjustment and some large shipments for international markets in the first quarter. Despite sales slipping quarter over quarter, the number of patients on the commercial drug increased 12% from the first quarter, suggesting there's still plenty of growth left.
• Sales of biosimilars -- copycats of biologic drugs -- were up 45% year over year, although they're still a small portion of Biogen's total revenue.
• Biogen generated about $2 billion of net cash flow from operations, boosted by the expiration of contingent payments related to sales of Tecfidera.
• The company used the cash to repurchase approximately 10.4 million shares for $2.4 billion, lowering the share count and boosting EPS.
• In June, Biogen closed its acquisition of genetic eye disease specialist Nightstar Therapeutics, adding two mid- to late-stage gene therapy programs.

Image source: Getty Images.

What management had to say

While some have worried about competition from Novartis' (NVS 1.10%) gene therapy Zolgensma, Jeffrey Capello, Biogen's chief financial officer, said the effect has been minimal so far: "Since its approval in late May, we have not seen a meaningful impact from Zolgensma on Spinraza performance in the U.S. As a reminder, Zolgensma is only indicated for children under two years old, which represents approximately 5% of the prevalent market."

Michel Vounatsos, Biogen's CEO, highlighted the company's progress on expanding its pipeline through acquisitions and licensing deals: "In total, we have added 17 clinical programs over the past 2.5 years. As we have materially expanded and diversified our pipeline, which now includes 27 clinical programs."

Looking forward

With a solid first half of the year under the company's belt, management felt comfortable raising 2019 guidance. Revenue is now expected to fall in the $14.0 billion to $14.2 billion range, up from $13.6 billion to $13.8 billion. Adjusted EPS is expected to come in between $31.50 and $32.30, an increase from the prior guidance range of $28.00 to $29.00.

On the pipeline front, look for data from the Evolve-MS-2 study comparing Vumerity, which Biogen got from Alkermes (ALKS 1.61%), to Tecfidera. Positive data could help launch Vumerity, which is currently under FDA review, and take pressure off of Tecfidera, which will face generic competition at some point, depending on the outcomes of lawsuits brought by generic-drug makers.

In the second half of this year, investors will also get data for BIIB092 in progressive supranuclear palsy, a brain disorder that causes problems with waking. It's only a phase II study, but positive results will give investors confidence the drug is working and might be able to expand into other related diseases.