A month has gone by since the last earnings report for Biogen (BIIB Quick QuoteBIIB - Free Report) . Shares have added about 4.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Biogen due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Biogen Tops Earnings & Sales in Q3

Biogen reported third-quarter 2018 earnings per share of $7.40, which beat the Zacks Consensus Estimate of $6.80. Earnings rose 17% year over year backed by higher revenues and a lower tax rate and share count.

Sales came in at $3.44 billion, up 12% from the year-ago period. Moreover, sales beat the Zacks Consensus Estimate of $3.33 billion. Revenue growth was principally driven by higher sales of Spinraza and higher contribution from biosimilars and Ocrevus royalties. Higher other revenues benefiting from greater contract manufacturing revenues also pulled up total revenues in the quarter. Meanwhile, the MS franchise was stable from second-quarter levels.

Quarter in Detail

Biogen’s multiple sclerosis (MS) revenues were $2.31 billion in the reporter quarter including approximately $137 million in royalties on the sales of Roche’s MS drug, Ocrevus. MS revenues were flat year over year as well as sequentially.

The number of patients on Biogen’s MS products globally was flat year over year.

In the fourth quarter, Biogen expects worldwide MS product revenues to be stable from the year-ago period, benefitting from a moderate inventory channel build and as Ocrevus impact will become less significant on a year-over-year basis.

Tecfidera’s sales rose 2% year over year to $1.09 billion. This included U.S. sales of $842.1 million (up 0.7% year over year) and ex-U.S. sales of $247.9 million (up 6.3%). However, Tecfidera sales were flat sequentially.

Tecfidera U.S. revenues were relatively stable in the third quarter compared against the declines seen in the first and the second quarters. Meanwhile, the strong ex-U.S. performance was driven by patient growth across European markets, solid emerging market growth and particularly strong performance in Japan, which offset the impact of ongoing price decreases in certain European countries.

Tysabri’s sales were flat year over year at $470 million. Tysabri U.S. sales declined 5.2% to $253.0 million in the quarter hurt by Ocrevus launch. International revenues rose 7.2% to $217.2 million driven by patient growth in all major European markets, except Germany and strong double-digit patient growth in emerging markets. Tysabri’s sales rose 1% sequentially.

Combined interferon revenues (Avonex and Plegridy) in the third quarter were $590 million, down 11% year over year and 6% sequentially. Avonex revenues declined 10% from the year-ago period to $482 million. Plegridy contributed $108 million to revenues, which decreased 13% year over year.

U.S. Interferon revenues are experiencing declining trends due to patients transitioning to other oral or high efficacy MS therapies.

Zinbryta generated no revenues in the quarter as the drug was withdrawn from the market in March 2018 due to growing safety concerns and limited commercial adoption. The drug had contributed $14 million to total revenues in the year-ago quarter.

Spinraza (spinal muscular atrophy) sales grew 73% year over year and 11% sequentially to $468 million driven by sales growth in both the United States and in the ex-U.S. markets.

Spinraza U.S. sales were $223.9 million in the third quarter, up 8.7% sequentially driven by increased new patient demand among adults. In ex-U.S. markets, Spinraza sales rose 12.5% sequentially to $243.8 million driven by strong patient uptake, expansion into new regions and accelerated pace of reimbursement across multiple geographies.

Overall commercial patients on Spinraza rose approximately 20% in the quarter. The number of patients on Spinraza grew approximately 11% in the United States and 29% outside the United States in the quarter compared with the end of the second quarter.

In the United States, the number of adult patients on Spinraza rose more than 20% in the quarter compared to last quarter, with the company capturing the under-penetrated adult segment. In the third quarter, more than 50% of the new patient starts in the United States comprised adults.

Management is optimistic that patient starts will grow in the United States as it continues to capture the adult segment, which represents approximately 60% of all SMA patients. It has till now penetrated only 15% of the adult segment and thus this segment represents a potential growth opportunity. In ex-U.S. markets, Spinraza’s uptake will continue to be driven by continued patient growth, although at a more modest rate in more mature markets.

Biogen said that approximately 60% of U.S. sales in the third quarter were from patients who received less intensive maintenance doses (dosing only once/4 months) versus 55% in the previous quarter.

In the third quarter of 2018, Biogen recorded biosimilar revenues of $135 million, up 33% year over year and 6% sequentially.

In the fourth quarter, Biogen expects relatively stable biosimilars revenue compared to the third quarter.

Revenues from Anti-CD20 therapeutic programs, which include Biogen’s share of Rituxan and Gazyva operating profits and Ocrevus royalties, increased almost 26% from the year-ago period to $511.7 million.

Research and development (R&D) spend increased 14% year over year to $508 million. Selling, general and administrative (SG&A) spend was up 14% year over year to $495 million. However, both SG&A and R&D costs declined sequentially in the third quarter.

In the quarter, the board of directors authorized a share buyback program of up to $3.5 billion. The company also said that it is evaluating opportunities for potential business development and M&A activity.

Pipeline Setbacks

On the third-quarter conference call, management announced a few pipeline setbacks.

Regarding the company’s gene therapy program for SMA, which is on clinical hold, Biogen said the FDA had raised questions on the company’s preclinical data package and that it is assessing options to determine if there is a viable path forward for the gene therapy program in SMA.

Biogen also said that a phase IIb study evaluating vixotrigine (Nav1.7 inhibitor) in painful lumbosacral radiculopathy did not meet its primary or secondary efficacy endpoints. Accordingly, the company has discontinued development of the candidate in this challenging indication. The company has delayed the start of a phase III study on the candidate in trigeminal neuralgia as interactions are ongoing with the FDA regarding the design of the phase III study.

Fourth Quarter Outlook

The fourth quarter of 2018 will face difficult comparisons from the prior-year quarter as the latter benefited from favorable timing of contract manufacturing.

Both R&D and SG&A expenses are expected to sequentially increase in the fourth quarter due to the timing of clinical trial expense and market expansion investments as well as seasonality.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Biogen has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Biogen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.