Biogen Q2 Earnings & Sales Beat, 2024 Guidance Raised

Biogen BIIB reported second-quarter 2024 adjusted earnings per share of $5.28, beating the Zacks Consensus Estimate of $4.00. Earnings rose 31% year over year. Earnings benefited from the sale of one of Biogen's two priority review vouchers (PRV). Excluding PRV sales, adjusted earnings rose 18% in the quarter.

Total revenues came in at $2.47 billion, flat on a reported basis and up 1% on a constant-currency basis from the year-ago quarter as lower sales of key multiple sclerosis drugs like Tecfidera and Tysabri as well as spinal muscular atrophy drug, Spinraza were partially offset by higher revenues from new drugs. Sales also beat the Zacks Consensus Estimate of $2.38 billion.

Product sales in the quarter were $1.9 billion, up 3% year over year. Revenues from anti-CD20 therapeutic programs rose 3% to $444.5 million. The revenues include royalties on sales ofRoche's Ocrevus and Biogen's share of Roche's drugs, Rituxan, Gazyva and Lunsumio.

Contract manufacturing and royalty revenues declined 32% in the quarter to $121.0 million. Contract manufacturing and royalty revenues include Biogen's 50% share of revenues (including royalties) from the Leqembi collaboration with Eisai and revenues from the manufacturing of Leqembi. Eisai recorded approximately $40 million in global sales from Alzheimer's drug Leqembi in the second quarter, showing a strong sequential growth from $19 million in the first quarter.

Leqembi has already been launched in the United States, Japan and China and was recently approved in some other countries like Israel, Hong Kong and South Korea.

Last month, Biogen/Eisai announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency had given a negative opinion regarding marketing approval for Leqembi (lecanemab) for early Alzheimer's disease in Europe.  The CHMP's negative opinion was reportedly due to a brain swelling side effect called amyloid-related imaging abnormalities associated with the use of anti-amyloid therapies like Leqembi. Eisai will request the CHMP to re-visit its opinion.

Core pharmaceutical revenues, comprising product sales plus Leqembi revenues, rose 5% in the quarter.

Multiple Sclerosis Revenues

Biogen's MS revenues came in at $1.15 billion, down 5% on a reported as well as constant-currency basis year over year due to generic competition for Tecfidera and rising competitive pressure in the MS market.

Tecfidera sales declined 0.8% to $252.2 million as multiple generic versions of the drug have been launched in the United States and new generic launches are ongoing in several EU countries. Tecfidera sales beat the Zacks Consensus Estimate of $236 million as well as our estimate of $228.8 million.

Vumerity recorded $165.8 million in sales, up 13.4%. Vumerity sales beat the Zacks Consensus Estimate of $154 million and our model estimate of $154.4 million.

Tysabri sales declined 4.3% year over year to $462.2 million, hurt by increased competition. Tysabri's sales beat the Zacks Consensus Estimate of $420 million and our estimate of $416.8 million.

Combined interferon revenues (Avonex and Plegridy) in the quarter were $250.9 million, down 17%, hurt by a continued shift from the injectable platform to oral or high-efficacy therapies.

Rare Disease Drugs

Sales of Spinraza declined 1.8% to $429.1 million due to increased competition. Sales of the drug beat the Zacks Consensus Estimate of $403 million but missed our estimate of $434.9 million.

Rare disease drug Skyclarys, which was added with the September 2023 acquisition of Reata Pharmaceuticals, generated sales of $100.0 million in the second quarter, compared with $78.0 million in the previous quarter. Skyclarys is the only drug approved for the treatment of Friedreich's ataxia.

Qalsody, which was launched in the United States for amyotrophic lateral sclerosis (ALS) last year, recorded sales of $5.0 million in the second quarter compared with $4.6 million in the previous quarter. Qalsody was approved in the EU in May.

Other Products

Zurzuvae (zuranolone), which was launched for postpartum depression in December 2023, recorded $15 million in sales in the second quarter. Biogen said the launch uptake of Zurzuvae is showing encouraging early trends. Biogen has developed Zurzuvae in partnership with Sage Therapeutics SAGE.

Biogen and Sage equally share profits and losses for the commercialization of Zurzuvae in the United States. At the same time, outside U.S. markets, Biogen records product sales (excluding Japan, Taiwan, and South Korea) and pays royalties to Sage. Zurzuvae has not yet been approved in the EU.

Biosimilar revenues rose 1.5% to $198.1 million.

Costs Decline

Adjusted research and development (R&D) expenses declined 21% year over year to $464 million, driven by the company's cost-saving initiatives under its "Fit for Growth" program. Adjusted selling, general and administrative expenses rose 1% to $542 million due to costs to support the new product launches.

In the quarter, the collaboration profit-sharing was a net expense of $62 million, which included $56 million of net profit-sharing expense related to Biogen's biosimilar collaboration with Samsung Bioepis and approximately $6 million of net profit-sharing expense related to Biogen's collaboration with Sage related to the commercialization of Zurzuvae in the United States.

2024 Guidance

Total revenues are expected to decline by a low single-digit percentage in 2024 from the 2023 level, which is better than the prior expectation of a decline in a low-to-mid-single-digit percentage. Core pharmaceutical revenues are expected to be roughly flat in 2024 compared to the 2023 level, as declines in MS revenues are expected to be offset by higher revenues from new products.

Adjusted earnings guidance was increased from a range of $15.00 to $16.00 to $15.75 to $16.25, implying growth of approximately 9% (previously 5%) at the midpoint.

Operating income is expected to grow at a mid-to-high-teen percentage versus the prior expectation of a low double-digit percentage in 2024, driven by lower cost of sales and lower operating costs due to the cost-saving initiatives. The operating margin is expected to increase by a mid-single-digit percentage point in 2024.

Our Take

Biogen's second-quarter results were strong as it beat estimates for both earnings and sales. Sales of all key drugs like Tecfidera, Tysabri and Spinraza beat estimates, with new products Leqembi and Skyclarys contributing significantly. Biogen also raised its EPS guidance for the year and gave a better guidance for the top line.

Despite the strong quarterly results and guidance increase, Biogen's shares were up only slightly in pre-market trading. This was probably because the company announced the termination of the Antibody Transport Vehicle-enabled anti-amyloid beta program with Denali Therapeutics DNLI. Biogen had in-licensed rights to Denali's program last year.

So far this year, the stock has declined 17.6% compared with a decline of 0.2% for the industry.

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Biogen also said that it will retain its biosimilars business. Biogen has been exploring options for divesting the business for a couple of years.

With most of Biogen's key drugs (Tecfidera, Tysabri and Spinraza) facing intense competitive pressure, management believes that the newer products Leqembi, Skyclarys and Zurzuvae have the potential to revive growth and drive the company's top line in the long term. Though the Leqembi launch was slow, sales have picked up in the first half.  Skyclarys' performance was impressive in the first half, while other new drugs, Zurzuvae and Qalsody, also showed encouraging early trends in the first half.

Biogen has also strengthened its mid-to-late stage pipeline with several recent M&A deals like HI-Bio in the second quarter, However, the new drugs are not yet generating enough sales to make up for the declining revenues of multiple sclerosis drugs and Spinraza.

Zacks Rank & Key Pick

Biogen currently has a Zacks Rank #3 (Hold).

A better-ranked large biotech company is Moderna MRNA, which has a Zacks Rank of 2 (Buy).

Moderna also announced second-quarter results before market open on Aug 1. Its loss of $3.33 per share was narrower than the Zacks Consensus Estimate of a loss of $3.47. Revenues of $241 million beat the Zacks Consensus Estimate of $124.9 million. However, MRNA lowered its product revenue guidance for 2024 from $4 billion to a range of $3.0-$3.5 billion due to expectations of very low sales in EU and an increasingly competitive environment for respiratory vaccines in the United States. The stock was down nearly 17% in pre-market trading on Thursday.

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