Biogen Idec Inc. (BIIB) is set to announce its second quarter 2010 results on Tuesday, July 20, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter is $1.08 per share (with a downside of 0.93%), compared to the 73 cents per share earned in the year-earlier period.
First Quarter Recap
Biogen’s first-quarter earnings per share of $1.04 was a cent above the year-ago figure of $1.03. Excluding the impact of stock-based compensation expense, earnings came in at $1.08 per share. The Zacks Consensus Estimate for the quarter was $1.12.
Despite an increase in revenue, performance was impacted by higher expenses including a $13 million charge taken due to the recently passed health care reform. Revenue increased 7% to $1.1 billion, with Tysabri and Avonex being the primary growth drivers. First-quarter Tysabri revenues came in at $219 million, up 32% from the prior period. Global in-market net sales of Tysabri, which is partnered with Elan Corp. (ELN), came in at $292 million (up 28%) in the first quarter of 2010.
Meanwhile, Biogen’s lead multiple sclerosis (MS) product Avonex posted first quarter sales of $593 million (up 7%). Sales benefited from a 5.5% price increase taken in February 2010.
Rituxan revenues declined 9% to $255 million. Biogen is looking to expand Rituxan's label to revive growth. Revenues from other products remained flat at $13 million. Royalties increased 8.3% to $26 million. The company expects the healthcare reform to affect revenues by about $70-$90 million in 2010.
Agreement of Analysts
3 of the 6 analysts covering the stock for the to-be-reported quarter have lowered earnings estimates, while none have moved in the opposite direction over the last 30 days. Annual estimates for 2010 have also been lowered by 2 analysts, with one upward movement over the last 30 days.
We believe that the downward estimate revisions for the to-be-reported quarter stem from concerns regarding the increasing number of progressive multifocal leukoencephalopathy (PML) cases being observed with Tysabri, the company’s second MS product. We believe that an increase in the number of PML cases associated with the use of Tysabri could lead to a slowdown in Tysabri sales going forward.
Until July 2009, 11 cases of PML infection were reported by the company. Since then, reports of additional cases of PML have been filtering in. As of July 2, 2010, the total number of PML cases was 58.
Additional instances of PML cases could hamper the product’s acceptance in the medical community thereby limiting its sales growth. In fact, we note that the number of new patients adopting Tysabri has been declining over the past few quarters. We believe the announcement by the US Food and Drug Administration (FDA) that the Tysabri label should contain stronger language regarding the incidence of PML associated with increased use of the drug has hampered new patient uptake. The prescribing information on the product’s label has since been updated.
Furthermore, competition is fierce for all of Biogen’s products. The impending approval of Novartis’ (NVS) Gilenia (target date: September 21, 2010) is expected to have a significant impact on Tysabri.
Magnitude of Estimate Revisions
The magnitude of revisions is modest over the 30 days. Estimates for the to-be-reported quarter have declined by 3 cents over the same period. The company’s fundamentals lead us to believe that the results for the second quarter will not cause any significant stock price movement.
For fiscal 2010, estimates have gone down by 2 cents. However estimates for 2011 have gone up by 6 cents over the last 30 days. The effort made by the company to expand its pipeline is expected to boost its top-line further.
Our Take & Recommendation
Even though we remain concerned about increasing competition and the increase in the number of PML cases associated with Tysabri’s use, we expect Avonex to continue contributing significantly to the top-line. Furthermore, we are encouraged to see that the company is working on expanding its MS and oncology pipeline. Besides this, Biogen has a number of other mid-to-late stage drugs in other therapeutic areas that could contribute sizably to growth in the next several years. In our opinion, Biogen has the best pipeline in all of biotech.
Consequently, we believe the current risk/reward profile for Biogen is balanced. This justifies not only the short-term Zacks#3 Rank on the stock but also our long-term Neutral stance on the stock.
Read the full analyst report on "BIIB"
Read the full analyst report on "NVS"
Read the full analyst report on "ELN"
Zacks Investment Research
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Biogen’s first-quarter earnings per share of $1.04 was a cent above the year-ago figure of $1.03. Excluding the impact of stock-based compensation expense, earnings came in at $1.08 per share. The Zacks Consensus Estimate for the quarter was $1.12.
Despite an increase in revenue, performance was impacted by higher expenses including a $13 million charge taken due to the recently passed health care reform. Revenue increased 7% to $1.1 billion, with Tysabri and Avonex being the primary growth drivers. First-quarter Tysabri revenues came in at $219 million, up 32% from the prior period. Global in-market net sales of Tysabri, which is partnered with Elan Corp. (ELN), came in at $292 million (up 28%) in the first quarter of 2010.
Meanwhile, Biogen’s lead multiple sclerosis (MS) product Avonex posted first quarter sales of $593 million (up 7%). Sales benefited from a 5.5% price increase taken in February 2010.
Rituxan revenues declined 9% to $255 million. Biogen is looking to expand Rituxan's label to revive growth. Revenues from other products remained flat at $13 million. Royalties increased 8.3% to $26 million. The company expects the healthcare reform to affect revenues by about $70-$90 million in 2010.
Agreement of Analysts
3 of the 6 analysts covering the stock for the to-be-reported quarter have lowered earnings estimates, while none have moved in the opposite direction over the last 30 days. Annual estimates for 2010 have also been lowered by 2 analysts, with one upward movement over the last 30 days.
We believe that the downward estimate revisions for the to-be-reported quarter stem from concerns regarding the increasing number of progressive multifocal leukoencephalopathy (PML) cases being observed with Tysabri, the company’s second MS product. We believe that an increase in the number of PML cases associated with the use of Tysabri could lead to a slowdown in Tysabri sales going forward.
Until July 2009, 11 cases of PML infection were reported by the company. Since then, reports of additional cases of PML have been filtering in. As of July 2, 2010, the total number of PML cases was 58.
Additional instances of PML cases could hamper the product’s acceptance in the medical community thereby limiting its sales growth. In fact, we note that the number of new patients adopting Tysabri has been declining over the past few quarters. We believe the announcement by the US Food and Drug Administration (FDA) that the Tysabri label should contain stronger language regarding the incidence of PML associated with increased use of the drug has hampered new patient uptake. The prescribing information on the product’s label has since been updated.
Furthermore, competition is fierce for all of Biogen’s products. The impending approval of Novartis’ (NVS) Gilenia (target date: September 21, 2010) is expected to have a significant impact on Tysabri.
Magnitude of Estimate Revisions
The magnitude of revisions is modest over the 30 days. Estimates for the to-be-reported quarter have declined by 3 cents over the same period. The company’s fundamentals lead us to believe that the results for the second quarter will not cause any significant stock price movement.
For fiscal 2010, estimates have gone down by 2 cents. However estimates for 2011 have gone up by 6 cents over the last 30 days. The effort made by the company to expand its pipeline is expected to boost its top-line further.
Our Take & Recommendation
Even though we remain concerned about increasing competition and the increase in the number of PML cases associated with Tysabri’s use, we expect Avonex to continue contributing significantly to the top-line. Furthermore, we are encouraged to see that the company is working on expanding its MS and oncology pipeline. Besides this, Biogen has a number of other mid-to-late stage drugs in other therapeutic areas that could contribute sizably to growth in the next several years. In our opinion, Biogen has the best pipeline in all of biotech.
Consequently, we believe the current risk/reward profile for Biogen is balanced. This justifies not only the short-term Zacks#3 Rank on the stock but also our long-term Neutral stance on the stock.
Read the full analyst report on "BIIB"
Read the full analyst report on "NVS"
Read the full analyst report on "ELN"
Zacks Investment Research
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