Biogen Still Growing Strong

7/6/2009


  Recent Price
$45
  Dividend
$0.00
  Yield

0.0%

  P/E Ratio
12
  Shares (millions)
290
  Long-Term Debt as % of Capital
15%
  52-Week Price Range
$73.59 - $37.21

Biogen Idec ($45; BIIB) has increased per-share profits in 10 of the last 11 quarters, including growth of 27% in the March quarter, with sales up at double-digit rates in each period. Profits met or topped consensus estimates in each of the past six quarters.

One of the largest U.S. biotech companies, Biogen believes it controlled more than 40% of the U.S. market for multiple sclerosis (MS) drugs in 2008. With a Quadrix® Overall score of 98, ranking it among the top 2% of our research universe, Biogen is a Focus List Buy and a Long-Term Buy.

Business breakdown
Tysabri (15% of sales in the last four quarters) has driven much of Biogen’s sales growth over the last year. Tysabri is also partly responsible for the stock’s volatility, reflecting worries about the drug’s link to a rare and potentially deadly brain disease, progressive multifocal leukoencephalopathy (PML). Three more patients contracted PML in June, raising the total to 10 since the drug’s reintroduction in 2006. The latest PML case caused shares to drop 5%.

Sales growth for Tysabri has slowed from a 210% gain in the June 2008 quarter to a 44% increase in the March 2009 quarter. However, Biogen says 90% of neurologists consider Tysabri the most effective MS treatment on the market. Most potential rivals are still in clinical trials, though one could be submitted for marketing approval this year.

While Tysabri builds its patient base, Biogen relies on two established drugs for the bulk of its sales and cash flows. Avonex (53% of sales), another MS treatment, grew revenue 14% over the last four quarters, largely through price increases. Rituxan (28%) for non-Hodgkin’s lymphoma and rheumatoid arthritis has also posted solid growth, with sales up 20% over the last year. Rituxan has upside potential as a possible treatment for several other diseases.

Biogen’s pipeline has about 20 drugs in Phase II clinical trials or beyond, including several being prepared for regulatory submission. The new drugs treat such diseases as non-Hodgkin’s lymphoma, chronic lymphocytic leukemia, relapsing MS, and rheumatoid arthritis. On July 1, Biogen acquired the foreign marketing rights to Fampridine-SR, an experimental drug made by Acorda Therapeutics ($28; ACOR) that could improve mobility for MS patients.

Marketing partner Elan ($6; ELN) is reportedly weighing the sale of Tysabri and other drugs in its portfolio to Novartis ($41; NVS). Biogen says it can buy the full marketing rights to Tysabri if Elan undergoes a change in control, but it’s less clear whether Biogen can block Tysabri’s sale to a third party.

Activist investor Carl Icahn won two seats on Biogen’s board in June after a noisy proxy battle. Icahn lobbied for the sale of Biogen in 2008 and proposed earlier this year to split up the company. While Icahn’s increased influence is a wild card, it does not change our opinion on Biogen, which enjoys strong capital-gains potential even without a takeover offer.

Conclusion
Wall Street expects profits to rise 13% this year and at an annualized rate of more than 11% over the next five years. Yet the shares look cheap at 12 times trailing earnings. An annual report for Biogen Idec Inc. is available from 14 Cambridge Center, Cambridge, MA 02142; (617) 679-2000; www.biogenidec.com.

BIOGEN IDEC
Quarter

    Per-Share
     Earnings*

Sales
Change

      Quarterly
      Price Range

P/E Ratio
Range

Mar '09 $1.05 vs. $0.83 + 10% $53.66 -

$42.92

15 - 12
Dec '08 0.93 vs. 0.89 + 20% 52.36 - 37.21 15 - 10
Sep '08 0.98 vs. 0.58 + 38% 73.59 - 45.37 23 - 14
Jun '08 0.91 vs.

0.70

+ 28% 67.45 - 55.68 22 - 19
           
Year
(Dec.)

Sales
 (Bil.)

Per-Share
Earnings*
Per-Share
Dividend

52-Week Price Range

P/E Ratio
Range

2008 $4.10 $3.66 $0.00 $73.59
-
$37.21 20 - 10
2007 $3.17 $2.74 $0.00 84.75
-
42.86 31 - 16
2006 $2.68 $2.25 $0.00 52.72
-
40.24 23 - 18
2005 $2.42 $1.57 $0.00 70.00
-
33.18 45 - 21
             
————————————————— Quadrix Scores † —————————————————
Overall Momen-
tum
Value Quality Financial
Strength
Earnings
Estimates
Performance
98 96 72 94 90 88 41

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


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