Biogen Lowers Its Full-Year 2015 Outlook in 2Q15
Biogen’s 2Q15 Earnings Beat Wall Street Estimates
Reduced Revenue Outlook
Following Biogen’s (BIIB) 2Q15 earnings announcement on July 24, 2015, the company’s share price fell by 22.1%. This is mainly due to the substantially reduced full-year 2015 outlook that the company published. Biogen’s blockbuster drug Tecfidera registered much-lower-than-expected revenue growth, resulting in low full-year 2015 guidance.
The above diagram represents the changes in Biogen’s 2015 outlook. Biogen reduced revenue growth forecasts from 14%–16% to 6%–8% for full-year 2015 compared to 2014. Biogen’s blockbuster drug Tecfidera’s revenues are expected to remain flat in the last two quarters of 2015. The drug’s growth in the US market stagnated as multiple sclerosis (or MS) patients didn’t switch from other injectable medications to oral Tecfidera at the rate witnessed in 2014. Also, the association of progressive multifocal leukoencephalopathy (or PML), a rare but deadly brain infection, with Tecfidera has further reduced confidence among the physician community. This has hurt Tecfidera’s prospects in the United States. The drug is witnessing pricing pressures in the German market, further reducing the revenue forecasts.
Unchanged expenses
Biogen is involved in the research and development (or R&D) of drugs targeting ailments relating to Alzheimer’s, hematology, oncology, and MS. Drugs such as Tysabri, Aducanumab, SMN-Rx, Tecdifera, and Gazyva are in the late phase 3 of clinical trials. Phase 3 generally involves substantial expenses, as it targets a larger test population.
Plus, Biogen has announced a collaboration with Applied Genetics Technologies Corp. (or AGTC) to develop gene therapies in ophthalmology. Assuming the deal closes, Biogen will be booking an additional $40 million in research expenses related to this collaboration. So the company has kept its R&D expense guidance unchanged for full-year 2015 at 19% to 20% of total revenues. This is in line with the R&D expenses as a percentage of total revenues seen for peer companies such as Amgen (AMGN), Celgene (CELG), and Regeneron Pharmaceuticals (REGN).
Plus, resources are required for commercializing and marketing of novel therapies. So Biogen’s selling, general, and administrative (or SG&A) guidance for 2015 also wasn’t changed.
Reduced revenues finally led to reduced earnings per share (or EPS) projections for Biogen. However, the company has provided assurance that it will lower the share base through its $5 billion share repurchase program if the share price comes under excessive downward pressure.
Instead of directly investing in Biogen, investors can get diversified exposure to the biotechnology sector by investing in the iShares NASDAQ Biotechnology ETF (IBB). IBB holds 7.48% in Biogen stock.
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