Biogen Cut to Neutral - Analyst Blog

We recently downgraded Biogen Idec, Inc. (BIIB) to Neutral from our previous Outperform recommendation. Biogen is one of the world's largest biotechnology companies. Its main areas of focus include neurology, oncology, hemophilia and immunology. Products such as Avonex (for multiple sclerosis), Rituxan (for non-Hodgkin's lymphoma), and Tysabri (for multiple sclerosis) currently drive the top line.

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's largest product, Avonex, posted sales of $2,322.9 million, up 5.5%, in 2009. We expect Avonex to continue contributing significantly to the top-line thanks to price increases, focused marketing effort and positive clinical data.

Meanwhile, Tysabri, the company's second MS product, continued to see an increase in patients despite carrying a black-box warning for the risk of progressive multifocal leukoencephalopathy (PML) and other cautionary language. Tysabri crossed $1 billion in sales in 2009.

Biogen is working on consolidating its position in the MS market and has an impressive late-stage pipeline of drugs including Ampyra, which was launched recently in the US by partner Acorda Therapeutics (ACOR). Biogen is responsible for non-US development and commercialization of Ampyra.

While we are pleased with Biogen's progress in the MS market, we are concerned about the additional competition that will come in the form of Novartis' (NVS) Gilenya. Gilenya will be competing primarily with Avonex and Tysabri for a share of the MS market.

Results from a study comparing Gilenya with Avonex showed that Gilenya reduced relapse rates by 52% at one year compared with Avonex. We remain concerned that being the first oral treatment to have gained US approval for the treatment of MS, Gilenya could take share from Biogen's products.

We also remain concerned that an increase in the number of PML cases associated with the use of Tysabri could hamper new patient additions. Additional instances of PML cases could hamper the product's acceptance in the medical community thereby limiting its sales growth.

Although Biogen's core business should remain stable in the coming quarters, we believe investor focus will remain on the occurrence of additional cases of PML associated with the use of Tysabri and the increased competition the company will be facing from Gilenya.
 
ACORDA THERAPT (ACOR): Free Stock Analysis Report
 
BIOGEN IDEC INC (BIIB): Free Stock Analysis Report
 
NOVARTIS AG-ADR (NVS): Free Stock Analysis Report
 
Zacks Investment Research