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Why Biogen's Q4 Results Were a Bust

You can almost always know how strong a company's near-term prospects are by looking at its stock price. Biogen's (NASDAQ: BIIB) shares sank more than 17% last year while the overall market soared, reflecting significant investor pessimism. However, the stock is up solidly so far in 2021. That's a good sign that investors' confidence has increased.

But that optimism could take a hit after Biogen reported its fourth-quarter results before the market opened on Wednesday. Here are the highlights from the biotech's Q4 update.

Image source: Getty Images.

By the numbers

Biogen's bad news started on the top line. The company reported revenue in the fourth quarter of $2.85 billion, down 22% year over year. However, this result narrowly topped the average analyst estimate of $2.8 billion.

The biotech announced fourth-quarter net income of $358 million, or $2.32 per share, based on generally accepted accounting principles (GAAP). This represented a sharp decline from its GAAP earnings of $1.4 billion, or $8.08 per share, recorded in the prior-year period.

On an adjusted basis, Biogen's net income in the fourth quarter totaled $706 million, or $4.58 per share. This was a lot lower than the company's adjusted earnings of $1.5 billion, or $8.34 per share, posted in the fourth quarter of 2019. It also came in well below the consensus Wall Street adjusted earnings estimate of $4.87 per share.

Behind the numbers

Biogen CEO Michel Vounatsos referred to 2020 as "a challenging year" for the company. The biotech's Q4 results underscored just how challenging it was.

In the past, Biogen could count on its multiple sclerosis (MS) franchise for solid growth. That's no longer the case. The company reported total MS revenue fell 24% year over year to $1.8 billion, brought down by plunging sales for Tecfidera and Avonex.

Until recently, Spinraza also served as a key growth driver for Biogen. However, in the fourth quarter sales of the spinal muscular atrophy drug slipped 8% year over year to $498 million.

Biogen's revenue from biosimilars increased in the fourth quarter, but not by much. Total biosimilar sales increased 1% year over year to $197 million. And even that growth was boosted by currency fluctuations. On a constant-currency basis, the company's biosimilar revenue decreased by 4%.

The biotech's bottom-line deterioration was primarily caused by its revenue decline. However, Biogen's research and development costs also skyrocketed nearly 150%. Most of this increase resulted from a charge of over $1 billion related to Biogen's collaboration with Sage Therapeutics.

Looking ahead

Biogen expects revenue for full-year 2021 will be between $10.45 billion and $10.75 billion. The company anticipates adjusted EPS between $17 and $18.50. Both guidance ranges reflect steep year-over-year declines.

Vounatsos said that the company "expect[s] a financial reset in 2021 primarily due to the entry of Tecfidera generics." But the biotech stock still has a major potential catalyst that could change its trajectory. Vounatsos added that Biogen thinks that 2021 could be "transformative year" for its pipeline.

In particular, he noted the anticipated U.S. Food and Drug Administration (FDA) decision on Alzheimer's disease candidate aducanumab in June. This almost certainly will be the most important FDA decision to watch this year.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.


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