What To Expect From Biogen's Earnings Report

| About: Biogen Inc. (BIIB)

Summary

Biogen is scheduled to report its fourth-quarter 2015 financial results on Wednesday, January 27, after market close.

According to 20 analysts' average estimate, Biogen is expected to post a profit of $4.07 a share, $0.02 decline from its actual earnings for the same quarter a year ago.

Biogen has a robust and broad pipeline with nine phase 3 programs. According to the company, it has had several significant developments in its pipeline.

The average target price of the top analysts is at $364.67, up 35.1% from the January 19 closing price, which appears reasonable in my opinion.

Bio GENE Biogen Inc. (NASDAQ:BIIB) is scheduled to report its fourth-quarter 2015 financial results on Wednesday, January 27, after market close. According to 20 analysts' average estimate, Biogen is expected to post a profit of $4.07 a share, a $0.02 decline from its actual earnings for the same quarter a year ago. The highest estimate is for a profit of $4.55 a share while the lowest is for a profit of $3.68 a share. Revenue for the third quarter is expected to increase 2.4% year-over-year to $2.70 billion, according to 19 analysts' average estimate. There were four EPS up revisions during the last thirty days. Since Biogen has shown earnings per share surprise in seven of its last nine quarters, as shown in the table below, we can expect that the company will beat estimates also in the fourth quarter.

Data: Yahoo Finance

I was encouraged by the fact that the company posted strong third-quarter earnings of $4.48 per share, well above the consensus of $3.80, and raised its full-year guidance. Also, I was impressed by this higher guidance, as well as by cost savings from a new workforce reduction and the strong potential of the company's Alzheimer and multiple sclerosis drugs. Biogen announced a corporate restructuring, which includes the termination of some pipeline programs and an 11% reduction in workforce. These changes are expected to reduce the current annual run rate of operating expenses by approximately $250 million.

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Source: Q3 2015 Biogen Earnings Presentation

Since the beginning of 2015, BIIB's stock is down 20.5% while the S&P 500 Index has decreased 8.6%, and the NASDAQ Composite Index has lost 5.5%. Since the beginning of 2012, BIIB has gained an impressive 145.2%. In this period, the S&P 500 Index has increased 49.6%, and the Nasdaq Composite Index has risen 71.8%. However, considering Biogen's compelling valuation, high growth prospects, and its leading position in Alzheimer and Multiple Sclerosis drugs, the recent drop in its price creates an excellent opportunity to buy the stock at an attractive price. According to TipRanks, the average target price of the top analysts is at $364.67, up 35.1% from the January 19 closing price, which appears reasonable, in my opinion.

BIIB Daily Chart

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BIIB Weekly Chart

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Charts: TradeStation Group, Inc.

On January 16, Biogen announced that the joint venture with Samsung BioLogics, Samsung Bioepis, has been granted European Commission approval for BENEPALI, an etanercept biosimilar referencing Amgen (NASDAQ:AMGN) Enbrel. BENEPALI has been granted marketing authorization in the European Union [EU] for the treatment of adults with moderate to severe rheumatoid arthritis, psoriatic arthritis, non-radiographic axial spondyloarthritis and plaque psoriasis. Biogen intends to make BENEPALI available for patients in the coming weeks. BENEPALI is the first etanercept biosimilar referencing Enbrel to be approved in the EU, making it the first subcutaneous anti-TNF biosimilar available there. Since Anti-TNF's are the largest component of the EU biologics market, accounting for approximately $10 billion of all biologics sold there, the approval could, in my opinion, significantly increase Biogen's sales in the European Union.

Biogen has a robust and broad pipeline with nine phase 3 programs. According to the company, it has had several significant developments in its pipeline. Biogen initiated enrollment for its Phase 3 clinical program for aducanumab for patients with early Alzheimer's disease. Millions of people worldwide are living with Alzheimer's disease and no disease-modifying treatment options. According to Biogen, it believes that this program has the potential to be a significant future growth driver for the company. In addition, the company announced Phase 3 results for TYSABRI and secondary progressive multiple sclerosis, and it continued to strengthen its pipeline by announcing an agreement to license exclusively MT-1303 for Mitsubishi Tanabe. MT-1303 is a phase 3 ready program with potential and multiple autoimmune diseases.

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Source: Biogen at 2016 J.P. Morgan 34th Annual Healthcare Conference

Valuation

Biogen's valuation is very good. The current ratio is very high at 3.50, and the forward P/E is low at 14.59. The PEG ratio is low at 1.23, the price-to-free-cash-flow ratio is at 19.76, and the Enterprise Value/EBITDA ratio is at 11.22.

As of September 30, 2015, Biogen purchased approximately 9.7 million shares of its common stock for a cost of approximately $3 billion in the open market under the company's previously authorized $5.0 billion share repurchase program. Since the end of the quarter, the company has purchased an additional 3.2 million shares for approximately $900 million.

Ranking

According to Portfolio123's "ValueSheet" ranking system, BIIB's stock is ranked fourth among all 56 S&P 500 healthcare stocks.

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The "ValueSheet" ranking system is quite complex, and it is taking into account many factors like; valuation ratios, growth rates, profitability ratios, financial strength, asset utilization, technical rank, industry rank, and industry leadership, as shown in Portfolio123's chart below.

Back-testing over sixteen years has proved that this ranking system is very useful. The reader can find the back-testing results of this ranking system in this article.

Summary

Biogen is scheduled to report its fourth-quarter 2015 financial results on Wednesday, January 27, after market close. According to 20 analysts' average estimate, Biogen is expected to post a profit of $4.07 a share, a $0.02 decline from its actual earnings for the same quarter a year ago. There were four EPS up revisions during the last thirty days. Since Biogen has shown earnings per share surprise in seven of its last nine quarters, we can expect that the company will beat estimates also in the fourth quarter. I was encouraged by the fact that the company posted strong third-quarter earnings of $4.48 per share, well above the consensus of $3.80, and raised its full-year guidance. Biogen has a robust and broad pipeline with nine phase 3 programs. According to the company, it has had several significant developments in its pipeline. Biogen's valuation is very good, the current ratio is very high at 3.50, the forward P/E is low at 14.59, and the PEG ratio is low at 1.23. The average target price of the top analysts is at $364.67, up 35.1% from the January 19 closing price, which appears reasonable, and, in my opinion, BIIB's stock is an excellent long term investment.

Disclosure: I am/we are long BIIB.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.