Sentiment wanes heading into Biogen's report (BIIB)
Biogen Idec Inc. (Nasdaq: BIIB) kicks off the earnings season for the large biotech companies next week. A decline in analyst sentiment for the stock might set up the company for a slight earnings surprise, on the back of recent price increases for its high-profile multiple sclerosis drug Avonex.
Expectations have come down for both earnings and revenue in recent months. So far in July, three of four analysts that made EPS changes revised their estimates lower. The downtrend is more stark for revenue estimates, with 16 of the 18 analysts covering the stock lowering their numbers since April.
The lowered revenue estimate could contribute to an upside earnings surprise, provided there are no large negative surprises on sales of either Avonex or its Rituxan drug for treating non-Hodgkins lymphoma. The company may also benefit slightly from weaker dollar trends, which help to boost overseas sales when they are accounted for in a weaker buck.
A wildcard for the quarter, however, is the progress Biogen has made in rebuilding its Tysabri franchise. Sales may actually decline from the same period a year ago, as doctors continue to scrutinize safety data on the MS drug.
It does not help at all that Biogen last month reported a tenth new case of a rare brain infection in patients taking the drug. There were at least three known cases of the infection reported in the quarter. A potential link to the infection, called progressive multifocal leukoencephalopathy, is what caused Tysabri to be taken off the market for a year-and-a-half back in 2005.
As it applies to the quarter, however, sales of Avonex have the greatest impact on results, which is why upside is still possible.
Biogen shares are down about 5 points near $45 a share since it last reported earnings in mid-April. Of note to traders is the support near $43.50 at the March lows, which may become a critical area of technical focus for both equity and options traders leading into the report. — Mike Tarsala
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