Biogen Inc. (BIIB) is set to announce its fiscal 2023 fourth-quarter earnings on February 13. Analysts predict a 3.2% year-over-year revenue dip to $2.46 billion, alongside a 21.5% decrease in EPS to $3.18 for the quarter. Nonetheless, the company is undertaking initiatives to expand its growth prospects.
On January 31, 2024, BIIB announced a strategic shift, prioritizing Alzheimer’s disease (AD) for short and long-term growth. This includes advancing LEQEMBI® (lecanemab-irmb), an FDA-approved anti-amyloid beta treatment, and expediting novel treatments to strengthen its market position.
Christopher A. Viehbacher, BIIB's President and CEO, said, “As a pioneer in Alzheimer’s disease, Biogen is reprioritizing resources to build a leading franchise to address the multiple pathologies of the disease and patient needs. We plan to further advance the launch of LEQEMBI, together with Eisai, and continue to bolster innovation with the development of the other assets in our pipeline.”
Additionally, on September 26, 2023, BIIB finalized the acquisition of Reata Pharmaceuticals, Inc. (RETA), which is focused on neurologic disease therapeutics regulating cellular metabolism and inflammation. This includes SKYCLARYS® (omaveloxolone) and other pipeline programs.
The acquisition aligns with BIIB's strategy to serve patients, drive sustainable growth, and create significant shareholder value by adding a highly complementary product to its portfolio in an area of significant unmet medical need.
However, it has also led BIIB to update its full-year 2023 outlook. The company expects non-GAAP EPS to come in at $14.50 to $15.00 compared to the previous guidance of $15.00 to $16.00. Shares of BIIB have plunged 5.7% over the past month and 16% over the past year to close the last trading session at $240.98.
Here are the financial aspects of BIIB that could influence its price performance in the near term:
Weak Financials
During the fiscal 2023 third quarter that ended September 30, 2023, BIIB’s total revenue marginally increased year-over-year to $2.53 billion. However, non-GAAP total net income attributable to BIIB and non-GAAP total EPS decreased 8.1% and 8.6% from the prior year’s period to $635.50 million and $4.36, respectively.
In addition, as of September 30, 2023, the company’s cash and cash equivalents amounted to $2.29 billion, down from $3.42 billion as of December 31, 2022.
Poor Historical Growth
Over the past three years, BIIB’s revenue and EBITDA decreased at CAGRs of 11.2% and 29.2%, respectively. Its net income and EPS declined at respective CAGRs of 34% and 30.8% over the same time frame. In addition, the company’s levered free cash flow dipped at a CAGR of 35.8% during the period.
Unoptimistic Analyst Estimates
The consensus revenue estimate of $9.93 billion for the fiscal year that ended December 2023 indicates a 2.4% year-over-year decrease. Likewise, the consensus EPS estimate of $14.98 for the same period exhibits a 15.2% decline from the prior year.
Mixed Profitability
The stock’s trailing-12-month gross profit margin of 75.12% is 31.8% higher than the 57.01% industry average. Its trailing-12-month EBITDA margin of 25.38% is 382.3% higher than the 5.26% industry average. However, the stock’s trailing-12-month CAPEX/Sales of 2.98% is 29.3% lower than the 4.22% industry average.
Lower-than-industry Valuation
In terms of forward non-GAAP P/E, BIIB is trading at 16.08x, 14.5% lower than the industry average of 18.81x. Its forward EV/EBIT of 15.67x is 8.2% lower than the 17.07x industry average. Moreover, the stock’s forward Price/Sales of 3.52x is 14.2% lower than the industry average of 4.10x.
POWR Ratings
BIIB’s outlook is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. BIIB has a B grade for Valuation, aligning with its discounted valuation. However, the stock has a C grade for Quality, which is in sync with its mixed profitability metrics. Furthermore, it garners a D grade for Growth, reflecting its historically poor performance.
BIIB is ranked #37 out of 351 stocks in the Biotech industry. Click here to access BIIB’s Momentum, Stability, and Sentiment ratings.
Bottom Line
BIIB is positioning itself for substantial long-term growth by prioritizing research and treatment advancements. Moreover, through strategic acquisitions, BIIB aims to address patient needs, drive sustainable development, and enhance shareholder value via innovation and expansion of its therapeutic portfolio.
However, the acquisition has also prompted the company to downgrade its full-year 2023 outlook. Additionally, considering BIIB’s underperformance in the last reported financial quarter and its current middling growth and profitability metrics, it could be wise to await a more opportune entry point in BIIB.
How Does Biogen Inc. (BIIB) Stack Up Against Its Peers?
While BIIB has an overall grade of C, equating to a Neutral rating, you may check out these A (Strong Buy) rated stocks within the Biotech industry: Incyte Corporation (INCY), Exelixis, Inc. (EXEL), and Corcept Therapeutics Incorporated (CORT). To explore more Biotech stocks, click here.
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BIIB shares were trading at $242.78 per share on Monday morning, up $1.80 (+0.75%). Year-to-date, BIIB has declined -6.18%, versus a 5.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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