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CAMBRIDGE, Mass. (
) -- When
(BIIB - Get Report)
reports second-quarter earnings on Thursday, there is one number that will matter above all others: U.S. sales of Tecfidera, the company's newly launched multiple sclerosis pill.
Strong Tecfidera sales are important to Biogen for obvious reasons, but the number has also taken on a larger importance for the entire biotech sector. UBS analyst Matt Roden, in a recent research note to clients, does a good explaining why:
The most important number investors are focusing on this quarter is the first print of US Tecfidera sales. A key question then is whether or not a strong/weak print will impact the sector as a whole. We believe that better than expected Tecfidera Rx numbers have been emblematic of value creation among the large caps in 2013, and have validated and strengthened the growth thesis in biotech that has driven a re-rating of the large-cap names...
Given that strong growth expectations have underpinned the relative outperformance of the sector this year (BTK +37% vs. S&P500 +17%), we believe a strong Tecfidera beat will further validate the outperformance, while a miss could cast doubt on other high-expectation growth stories (e.g. Gilead (GILD - Get Report)
and next year's sofosbuvir launch in HCV.)
Nailing down expectations for second-quarter Tecfidera sales with precision is a bit tricky because sell-side "consensus" is a lot lower than the "whisper number" bandied about by buyside investors.
The sell-side consensus estimate for Tecfidera sales in the June quarter is $65 million, according to JP Morgan. The consensus estimate quoted by other analysts is generally in the same ballpark.
Okay, now forget this $65 million estimate for Tecfidera sales because it's totally irrelevant. If Biogen posts $70 million in Tecfidera sales on Thursday, the stock gets slaughtered.
The buyside i.e. institutional investors are looking for Biogen to report at least $90 million in U.S. Tecfidera sales for the June quarter, according to ISI Group analyst Mark Schoenebaum, who does a better job than most surveying the expectations of biotech investors.
Even $90 million may not be enough because the "whisper whisper number" is probably closer to $100 million as Thursday's earnings report nears, he says.
To make matters even more confusing, trying to predict Tecfidera sales based on weekly prescription data provided by services like IMS and Symphony Health has been hampered by double-counting of prescriptions due to the way Tecfidera is dispensed.
You still with me? Let's try to simplify all this. Tecfidera sales in the range of $90 million to $100 milllion are what Biogen needs to report in order for the stock to move higher. The closer to $100 million the better. A number significantly above $100 million will be great news for the stock. Obviously, significantly lower reported Tecfidera sales are bad.
Outside of just the number, investors will also be listening to hear from Biogen management about where Tecfidera patients are coming from? How many newly diagnosed patients are being prescribed the drug? How many patients are switching from other multiple sclerosis drugs, including Novartis' MS pill Gilenya.
Lastly, listen closely for any new information regarding Tecfidera's launch and exclusivity issues in Europe, both of which have been the cause for some concern.
-- Reported by Adam Feuerstein in Boston.