Positive on Biogen - Analyst Blog

We recently upgraded Biogen Idec (BIIB) to Outperform following the release of third quarter results. Key products, Avonex and Tysabri, should continue contributing significantly to sales. Meanwhile, the company's restructuring initiative should help drive the bottom-line. We are also pleased with the company's intention to streamline its pipeline and focus on candidates that represent higher potential.

Biogen reported a strong third quarter with earnings coming in at $1.33, well above the Zacks Consensus Estimate of $1.20 and the year-earlier figure of $1.09. Performance was boosted by higher revenues and a lower share count.

Revenues increased 5% to $1.2 billion, with Tysabri and Avonex being the primary growth drivers. Biogen also announced a restructuring program which should result in annual cost savings in the range of $300 million. The company's restructuring program includes initiatives like streamlining of operations, shutting down of facilities, and workforce reduction.

Biogen increased its earnings guidance for 2010 by 15 cents. With R&D and SG&A spend expected to decline, earnings estimates for 2010 and 2011 have gone up significantly. We have raised our earnings estimate for 2010 by 16 cents to $4.86. Our earnings estimate for 2011 has gone up by 65 cents to $5.66 per share after taking into consideration the cost savings that should arise from the restructuring initiative.

Biogen is the market leader in therapies for the treatment of multiple sclerosis (MS). We believe the company will continue to retain a leading position in the MS market. Biogen is working on consolidating its position in the MS market and has an impressive late-stage pipeline of drugs including Ampyra, BG-12, and daclizumab.

As part of its restructuring program, Biogen intends to focus on the development of those candidates that represent higher return potential. The company's main R&D focus will be on neurological diseases like multiple sclerosis, amyotrophic lateral sclerosis (ALS), or Lou Gehrig's disease, and Parkinson's disease.

Biologics is another area which could help drive long-term growth at the company. We believe Biogen will look to bolster its biologics pipeline through partnerships and in-licensing deals.

Our biggest concern with the stock remains the competitive threat posed by Novartis' (NVS) Gilenya, which was launched in early October 2010. Gilenya will be competing primarily with Avonex and Tysabri for a share of the MS market.

 
BIOGEN IDEC INC (BIIB): Free Stock Analysis Report
 
NOVARTIS AG-ADR (NVS): Free Stock Analysis Report
 
Zacks Investment Research