Cost cutting helps Biogen top Wall Street estimates for quarter

(Reuters) - Aggressive cost cutting propelled Biogen Inc to a better-than-expected first quarter profit as the biotechnology company’s reorganization moves began to pay off, and its shares rose nearly 5 percent.

Sales of Biogen’s most important products came in shy of Wall Street estimates, but the company slashed expenses, with selling, general and administrative costs down 11.3 percent and research and development spending down 5 percent.

Biogen last year announced a restructuring that involved cutting jobs and development of some medicines to focus on more high-risk, high-reward therapies, such as for Alzheimer’s disease.

The company, in a conference call with analysts, said the benefits of the restructuring were realized in the first quarter and that it would continue to focus on further spending reductions, while supporting advance of its drugs in development.

Excluding one-time items, Biogen earned $4.79 per share, topping analysts’ average expectations by 32 cents, according to Thomson Reuters I/B/E/S.

“They’re definitely taking costs out of the system and watching their pennies,” said Cowen and Co analyst Eric Schmidt.

“The commercial business is treading water at best. We’re crossing our fingers and hoping that something in the pipeline works,” he said.

The company is enrolling patients for two Phase III trials of its high-profile Alzheimer’s drug, aducanumab, and has high hopes for an experimental treatment for spinal muscular atrophy in partnership with Ionis Pharmaceuticals.

Sales of its most important multiple sclerosis drug Tecfidera rose 15 percent from a year ago to $946 million in the quarter, missing Wall Street estimates of about $960 million. Sales of the oral drug were hurt somewhat by inventory drawdown, which was partially offset by a price increase.

Biogen said its Tecfidera television ads had raised patient awareness of the drug and that it planned to halt the campaign in the middle of this year.

Biogen management refused to discuss reports, including by Reuters, that it was looking for a buyer for its relatively new two-drug hemophilia franchise, saying it was pleased with the performance of the medicines.

“If they weren’t selling the hemophilia business, they’d have said so. They would have put this (rumor) to bed and they didn’t,” said Leerink Partners analyst Geoffrey Porges.

Given all their cash and borrowing capacity, Porges said, “you have to wonder what they’re preparing to buy. They’re obviously making room in their balance sheet for a material acquisition.”

Biogen Chief Executive George Scangos said the company was indeed in the market for potential deals, including looking at drugs in late-stage development.

“We continue to track companies and compounds that are interesting to us,” he said.

Total revenue for the quarter rose 6.7 percent to $2.73 billion, just short of analyst estimates of $2.75 billion.

Net income rose 18 percent to $970.9 million, or $4.43 per share, from $822.5 million, or $3.49 a share, a year ago.

Biogen shares were up $12.78, or 4.8 pct at $278.67 on Nasdaq.

Reporting by Amrutha Penumudi in Bengaluru; Editing by Kirti Pandey and Meredith Mazzilli