Why Biogen Stock Got Mashed on Monday
Key Points
Management aims to book a $34 million charge in the quarter.
This is due to loftier anticipated spend on items such as milestone payments and research and development activities.
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Healthcare company Biogen (NASDAQ: BIIB) wasn't looking very healthy on the stock market on Monday. Investors traded out of its shares after learning that the company plans to book a hefty charge in its first quarter, which will directly affect its bottom line. By the end of the day, Biogen's stock had lost nearly 3% of its value.
Unhappy about a big charge
Before market open, Biogen divulged in a regulatory filing that it expects to record $34 million in pre-tax expenses in its first quarter of this year. These consist of in-process research and development costs, as well as upfront and milestone payments.
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That charge will likely impact the company's net income by roughly $0.19 per share under both generally accepted accounting principles (GAAP) and non-GAAP standards.
Also on Monday, the biotech set the date for its earnings release detailing that quarter's performance. This is slated to occur before market open on Wednesday, April 29.
Investors tracking Biogen stock were expecting the company to post only a slight year-over-year gain in headline net income, to $2.95 per share. However, most, if not all, of those estimates came before the company announced the $34 million charge.
Hungry for more encouraging news
The past few weeks have been eventful for Biogen; at the end of last month, it announced it was spending around $5.6 billion to acquire Apellis Pharmaceuticals.
Investors weren't happy to hear that news either, but I think they should give Biogen more of a chance. It's doing a good job pivoting from its traditional but unsustainable strength in multiple sclerosis therapies into higher-potential segments. Transitions in the healthcare industry tend to be rocky at times, so the latest developments with the company don't spook me. Biogen remains a quality stock.
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Eric Volkman 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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