This biopharma beat last quarter’s estimates by $0.42, and 14 analysts have increased their 2016 EPS forecasts in the past 30 days.
Biogen (BIIB)
From Argus Weekly Staff Report
For drug companies, we place emphasis on the growth of key products as we build our earnings models. For Biogen (BIIB), that’s Tecfidera—its top-selling MS drug. In 4Q15, sales of Tecfidera rose 8% year-over-year and 6% sequentially to $993 million, above the consensus forecast of $940 million. BIIB’s other MS drugs include Tysabri, Avonex and Plegridy, which had combined 4Q15 sales of approximately $1 billion. Two cancer drugs, Rituxan and Gazyva, contributed $317 million to revenue.
High margins drive BIIB’s profits. COGS accounted for 14% of 4Q15 sales, below the industry average. The non-GAAP net margin was a healthy 41%, with SG&A spending at 24% of sales and R&D at 22%. Revenue rose 6% year-over-year to $2.8 billion, beating the $2.7 billion consensus, and non-GAAP EPS rose 10% to $4.50, topping the consensus of $4.07.
Management projects 2016 sales of $11.1-$11.3 billion, implying growth of 2%-5%, and EPS of $18.30-$18.60. The current 2016 consensus forecast is $18.48. We expect sales to rise 4% in 2016. Based on our higher sales forecast, we are boosting our 2016 EPS forecast to $18.47 from $17.66, which implies 9% growth from 2015. Our estimates could rise if the company reports positive phase III trial results for aducanumab, a potential Alzheimer’s treatment, or makes a significant acquisition. Our 2017 EPS estimate is $20.04.
BIIB shares are currently trading near the bottom of their 52-week range of $255-$480, and at 14.4-times our 2016 EPS estimate, below the peer average of 20.0 for mature biotech companies. We see the company’s strong 4Q results, cost savings from its 11% headcount reduction, and promising pipeline drugs for Alzheimer’s disease and MS as potential catalysts. Our target price of $360 implies a multiple of 19.5-times our 2016 EPS estimate.
Jim Kelleher, CFA, Argus Weekly Staff Report, www.argusresearch.com, 212-425-7500, February 8, 2016