Biogen Inc. (BIIB) is scheduled to report its third-quarter (ended September 30, 2023) results on November 8, 2023, before the stock market opens. While the company’s EPS and revenue for the third quarter are expected to decline year-over-year, it could be wise to invest in the stock now for reasons discussed throughout this article.
BIIB’s EPS in the third quarter is expected to decline 16.4% year-over-year to $3.99. Its revenue is expected to decline 4.2% year-over-year to $2.40 billion. Lower sales of its Multiple Sclerosis (MS) segment products, which include drugs like TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI, and FAMPYRA, will likely have affected its revenues. In the last reported quarter, its MS portfolio sales declined 15% year-over-year to $1.21 billion.
The U.S. biotech company’s spinal muscular atrophy (SMA) segment drug Spinraza sales are expected to have risen again in the United States. Sales of Spinraza during the second quarter had increased 11.4% year-over-year in the United States but declined 3.4% year-over-year in the Rest of the World due to currency headwinds and unfavorable pricing.
Additionally, biosimilar segment revenues are expected to rise marginally year-over-year, like in the last reported quarter. During the quarter, the company announced the acquisition of Reata for approximately $7.3 billion. The acquisition will be significantly accretive to BIIB’s non-GAAP EPS from 2025.
Earlier this year, Reata achieved its first drug approval in its 21-year history as the FDA signed off on Skyclarys (omoveloxolone) to treat Friedreich’s ataxia (FA). It is the first drug approved for the rare condition.
BIIB’s President and CEO Christopher Viehbacher said, “With extensive expertise in rare disease product development and global commercialization, as demonstrated by SPINRAZA and the recent launch of QALSODY, we believe Biogen has the foundation in place to accelerate the delivery of SKYCLARYS to patients around the world.”
“This is a unique opportunity for Biogen to bolster our near-term growth trajectory, and SKYCLARYS is an excellent complement to our global portfolio of treatments for neuromuscular and rare disease,” he added.
On September 29, 2023, BIIB announced that the U.S. FDA approved TOFIDENCE (tocilizumab-bavi) intravenous formulation, a biosimilar monoclonal antibody referencing ACTEMRA. It is the first tocilizumab biosimilar approved in the U.S. The TOFIDENCE intravenous formulation is approved for the treatment of moderately to severely active rheumatoid arthritis, polyarticular juvenile arthritis and systemic juvenile idiopathic arthritis.
On July 6, 2023, BIIB and Eisai Co., Ltd. announced that the FDA had approved the supplemental Biologics License Application (sBLA) supporting the traditional approval of LEQEMBI, making it the first and only approved treatment to show a reduced rate of disease progression and to slow cognitive and functional decline in adults with Alzheimer’s disease.
BIIB’s stock has declined 10.2% year-to-date and 11.8% over the past year to close the last trading session at $248.63.
Here’s what could influence BIIB’s performance in the upcoming months:
Mixed Financials
BIIB’s total revenue for the second quarter ended June 30, 2023, declined 5.1% year-over-year to $2.46 billion. Its non-GAAP net income attributable to BIIB decreased 23.8% over the prior-year quarter to $584.60 million. Also, its non-GAAP EPS came in at $4.02, representing a decline of 23.4% year-over-year. In addition, its free cash flow decreased 40.5% over the prior-year quarter to $416 million.
Its biosimilar revenue rose marginally year-over-year to $195 million. Similarly, its contract manufacturing, royalty and other revenue increased 102% year-over-year to $198 million.
Mixed Analyst Estimates
Analysts expect BIIB’s EPS and revenue for fiscal 2023 to decline 13.8% and 4.3% year-over-year to $15.23 and $9.74 billion, respectively. Its revenue for fiscal 2024 is expected to decline 1.9% year-over-year to $9.55 billion. On the other hand, its EPS for fiscal 2024 is expected to increase 6.6% year-over-year to $16.24.
Discounted Valuation
In terms of forward non-GAAP P/E, BIIB’s 16.38x is 11.2% lower than the 18.45x industry average. Its 11.27x forward EV/EBITDA is 8.7% lower than the 12.34x industry average. Likewise, its 13.35x forward EV/EBIT is 16.2% lower than the 15.93x industry average.
High Profitability
In terms of the trailing-12-month EBITDA margin, BIIB’s 30.95% is 514.3% higher than the 5.04% industry average. Likewise, its 26.24% trailing-12-month EBIT margin is significantly higher than the industry average of 0.15%. Furthermore, the stock’s 76.23% trailing-12-month gross profit margin is 36.8% higher than the industry average of 55.72%.
POWR Ratings Show Promise
BIIB has an overall B rating, equating to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. BIIB has an A grade for Value, consistent with its discounted valuation. It has a B grade for Quality, in sync with its high profitability.
BIIB is ranked #19 out of 351 stocks in the Biotech industry. Click here to access BIIB’s Growth, Momentum, Stability, and Sentiment ratings.
Bottom Line
Although BIIB’s EPS and revenue in the third quarter are expected to decline year-over-year, its long-term prospects look solid, especially with the recent FDA approval of its drugs, including LEQEMBI, Qalsody, Zuranolone, and TOFIDENCE. All these drugs are expected to boost its sales in the long run. Additionally, the acquisition of Reata adds a rare condition drug, Skyclarys, which will become earnings accretive in 2025.
Given this favorable backdrop, high profitability, and discounted valuation, it could be wise to buy the stock now.
How Does Biogen Inc. (BIIB) Stack Up Against Its Peers?
While BIIB has an overall grade of B, equating to a Buy rating, you may also check out these other A (Strong Buy) or B (Buy)-rated stocks within the Biotech industry: Gilead Sciences, Inc. (GILD), Jazz Pharmaceuticals plc (JAZZ), and Alkermes plc (ALKS). For exploring more Biotech stocks, click here.
What To Do Next?
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BIIB shares were trading at $247.25 per share on Tuesday morning, down $1.38 (-0.56%). Year-to-date, BIIB has declined -10.71%, versus a 15.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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