I set out to write a quick article on Biogen, but one thing led to another, and it expanded into a relatively detailed analysis. I own Biogen, and while there are some negatives in the picture like declining interferon sales, on the whole it looks very positive for the next few years.
The full article:
Biogen (BIIB) Keys to Value in 2017 and Beyond
Keep diversified!
Showing posts with label BIIB. Show all posts
Showing posts with label BIIB. Show all posts
Thursday, June 2, 2016
Friday, August 2, 2013
Biogen Idec (BIIB) Runs Up
I submitted an article to Seeking Alpha yesterday, in favor of Biogen Idec, and the stock ran up substantially this morning before my article was released around 11 AM Pacific Time. I own some BIIB. I just want to say that the editorial turnaround time was within normal limits, and other articles have appeared elsewhere that are also positive on BIIB, during the last few days.
My article:
Biogen Idec Product Pipeline will Propel it Higher
Don't ignore the risks, even when the upside dominates: keep diversified!
My article:
Biogen Idec Product Pipeline will Propel it Higher
Don't ignore the risks, even when the upside dominates: keep diversified!
Tuesday, July 30, 2013
New Celgene (CELG) article
I have a new article published today at Seeking Alpha:
Celgene Up Over 100% in a Year. Still a Buy?
I also have an article under editorial review on Gilead (GILD).
Today I hope to write up my thoughts on Biogen Idec as well.
On the whole Celgene, Biogen, and Gilead, plus Onyx Pharmaceutical, have been my best investment segment. Buying them goes back to the time I wrote:
Choosing a Biotechnology Stock
Which, while the specifics have changed, still gives some good tips on what tips to look for if you want to choose individual stocks instead of a biotechnology fund.
Celgene Up Over 100% in a Year. Still a Buy?
I also have an article under editorial review on Gilead (GILD).
Today I hope to write up my thoughts on Biogen Idec as well.
On the whole Celgene, Biogen, and Gilead, plus Onyx Pharmaceutical, have been my best investment segment. Buying them goes back to the time I wrote:
Choosing a Biotechnology Stock
Which, while the specifics have changed, still gives some good tips on what tips to look for if you want to choose individual stocks instead of a biotechnology fund.
Tuesday, April 30, 2013
Biogen Idec Too High Too Fast?
Biogen Idec (BIIB) is now off its 52-week high of $226.18 (reached earlier today) but up from a 52 week low of $126.39 (of June 4, 2012). At $218.84 it has risen 73% off the low.
I began following BIIB in the first quarter of 2006, but did not acquire stock until February 2008, when I picked it up at $61.57 per share. In the short run I overpaid, but I picked up more later that year at $46.97. I person with perfect timing could have picked up shares at $40.27 on November 28, 2008. Biogen then rose to $67.05 by the end of 2010, and looks like it invented an anti-gravity machine this January.
Biogen did so well that it became too large a percentage of my portfolio (according to my portfolio rules) so I sold half of my position on May 16, 2012 for $137.19. Now of course I wish I had violated my portfolio rules and kept the stock longer, but I had other situations where those same rules kept me out of major trouble (they were the main reason I sold most of my Dendreon stake before the price collapsed).
Even though my remaining Biogen stake is well within my portfolio rules I have to ask: is BIIB overpriced? Should I sell it and look for a better value proposition?
There were reasons Biogen was priced where it was in 2008 through 2010, the big one being a disease called PML (progressive multifocal leukoencephalopathy) caused by the JVC virus. Biogen's specialty is multiple sclerosis MS therapies. Its Avonex was the most prescribed MS therapy, but the new wonder drug was supposed to be Tysabri. MS is an autoimmune disease; MS therapies work by selectively suppressing the immune system. Turned out, the JVC virus lurks in the brains of about 1/2 the population, generally doing no harm except when the immune system collapses, when it causes PML, and often results in death.
Tysabri use led to some PML cases, and in a few instances to death. Not knowing what the rate was, nor what treatment could be given for PML, the FDA revoked Tysabri's marketing license. The immediate solution turned out to be to monitor for PML and stop giving Tysabri if there were symptoms. The FDA re-approved Tysabri provided a monitoring program was in place. While Tysabri was so effective that sales ramped back up substantially, naturally there was concern by doctors, patients, and investors that we might see more PML deaths and a permanent ban on Tysabri.
Nevertheless in Q1 2008 Tysabri sales were $115 million, total Biogen revenue was $942 million, and GAAP EPS was $0.54. It being the recession, investors were risk-adverse, and it seemed no amount of good news on Tysabri, revenue, or profit could do much for the stock until late 2010.
So much of the run up in the price was just investors catching up to the new reality: a highly-profitable biotechnology company with a strong pipeline of potential future blockbusters. But in the same way investors lagged reality before 2011, perhaps so many momentum players have jumped on the BIIB bandwagon that the stock has gotten ahead of its fair valuation.
By the beginning of 2013 we had pre-screening for JVC and better treatments for PML, reducing the risk of PML mortality to statistically close to zero. We have substantial Fampyra revenues, though that therapy had also had its issues.
Plegridy (peginterferon beta-1a) for relapsing MS pivotal Phase III data has met all primary and secondary endpoints after 1 year cutoff of a two-year study. Biogen expects to file with FDA and EMA (Europe) by mid-2013
Daclizumab-HYP Phase III data readout expected in 2014. It is also for relapsing forms of MS.
Biogen also filed for approval with FDA for Hemophilia Factor 8 for A and 9 for B, based on significant Phase III trial results.
A number of other therapies are in Phase I, II, or III trials. See the Biogen-Idec product pipeline for more details.
So we can figure that the most likely scenario is that Biogen Idec will see substantial revenue and profit growth over the next few years and new therapies come to market. It is unlikely that everything in the pipeline will get good results and FDA approval, but Biogen has a lot of shots on goal.
You can build spreadsheets (and I have, and sell-side analysts certainly do) guessing at revenue and profits from future therapies based on patient populations, competing therapies, and guesses about pricing. But experienced pharmacology and biotechnology investors know that promising therapies often fail, and unexpected side effects can show up even after FDA approval. Picking winners of competitive races is also more guesswork than science.
So a good hard look at the latest quarter should keep us anchored in reality, and then some P/E ratio points can be added to reflect optimism about profit growth in the next few years; add as many points as you are comfortable with.
Biogen reported on the first quarter of 2013 last Thursday. Revenue of $1.415 billion was up 9.5% from Q1 2012, which is quite good and means a fair P/E ratio should be above the market average. GAAP EPS was $1.79, up 43% y/y; now that should be worth some a P/E ratio well above market. Ballpark it at 30 to 1.
Guidance is for 2013 GAAP EPS of $6.69 to $6.90. Given that non-GAAP guidance is $7.80 to $7.90, let's use $7.00 and multiply by 30. That gives us $210 per share, not much off today's auction price.
So my ballpark estimation is that even at this price BIIB is still a good value. Included in the price are estimated 2013 profits. The pipeline of new drugs revenue and profits won't kick in substantially until 2014. I would expect BIIB to end 2014 in a higher price band, depending on the details of new product ramps.
I am inclined to hold my BIIB and, if I need to sell stock because I spot another opportunity as good as Biogen was in 2008, I could probably find something else to sell. Most likely I will leave BIIB off the leash until it again becomes a risk management problem from being too large a percentage of my portfolio. If I am wrong and it falls in the short run, or becomes a smaller percentage of my portfolio again because something else runs up, I might even buy more.
Keep diversified!
Disclaimer: I own share of BIIB and reserve the right to sell them or buy more at any time, even though I currently have no plans to change my position.
See also:
My Biogen Idec main analyst conferences page.
My BIIB Q1 2013 conference notes
www.biogenidec.com
I began following BIIB in the first quarter of 2006, but did not acquire stock until February 2008, when I picked it up at $61.57 per share. In the short run I overpaid, but I picked up more later that year at $46.97. I person with perfect timing could have picked up shares at $40.27 on November 28, 2008. Biogen then rose to $67.05 by the end of 2010, and looks like it invented an anti-gravity machine this January.
Biogen did so well that it became too large a percentage of my portfolio (according to my portfolio rules) so I sold half of my position on May 16, 2012 for $137.19. Now of course I wish I had violated my portfolio rules and kept the stock longer, but I had other situations where those same rules kept me out of major trouble (they were the main reason I sold most of my Dendreon stake before the price collapsed).
Even though my remaining Biogen stake is well within my portfolio rules I have to ask: is BIIB overpriced? Should I sell it and look for a better value proposition?
There were reasons Biogen was priced where it was in 2008 through 2010, the big one being a disease called PML (progressive multifocal leukoencephalopathy) caused by the JVC virus. Biogen's specialty is multiple sclerosis MS therapies. Its Avonex was the most prescribed MS therapy, but the new wonder drug was supposed to be Tysabri. MS is an autoimmune disease; MS therapies work by selectively suppressing the immune system. Turned out, the JVC virus lurks in the brains of about 1/2 the population, generally doing no harm except when the immune system collapses, when it causes PML, and often results in death.
Tysabri use led to some PML cases, and in a few instances to death. Not knowing what the rate was, nor what treatment could be given for PML, the FDA revoked Tysabri's marketing license. The immediate solution turned out to be to monitor for PML and stop giving Tysabri if there were symptoms. The FDA re-approved Tysabri provided a monitoring program was in place. While Tysabri was so effective that sales ramped back up substantially, naturally there was concern by doctors, patients, and investors that we might see more PML deaths and a permanent ban on Tysabri.
Nevertheless in Q1 2008 Tysabri sales were $115 million, total Biogen revenue was $942 million, and GAAP EPS was $0.54. It being the recession, investors were risk-adverse, and it seemed no amount of good news on Tysabri, revenue, or profit could do much for the stock until late 2010.
So much of the run up in the price was just investors catching up to the new reality: a highly-profitable biotechnology company with a strong pipeline of potential future blockbusters. But in the same way investors lagged reality before 2011, perhaps so many momentum players have jumped on the BIIB bandwagon that the stock has gotten ahead of its fair valuation.
By the beginning of 2013 we had pre-screening for JVC and better treatments for PML, reducing the risk of PML mortality to statistically close to zero. We have substantial Fampyra revenues, though that therapy had also had its issues.
Plegridy (peginterferon beta-1a) for relapsing MS pivotal Phase III data has met all primary and secondary endpoints after 1 year cutoff of a two-year study. Biogen expects to file with FDA and EMA (Europe) by mid-2013
Daclizumab-HYP Phase III data readout expected in 2014. It is also for relapsing forms of MS.
Biogen also filed for approval with FDA for Hemophilia Factor 8 for A and 9 for B, based on significant Phase III trial results.
A number of other therapies are in Phase I, II, or III trials. See the Biogen-Idec product pipeline for more details.
So we can figure that the most likely scenario is that Biogen Idec will see substantial revenue and profit growth over the next few years and new therapies come to market. It is unlikely that everything in the pipeline will get good results and FDA approval, but Biogen has a lot of shots on goal.
You can build spreadsheets (and I have, and sell-side analysts certainly do) guessing at revenue and profits from future therapies based on patient populations, competing therapies, and guesses about pricing. But experienced pharmacology and biotechnology investors know that promising therapies often fail, and unexpected side effects can show up even after FDA approval. Picking winners of competitive races is also more guesswork than science.
So a good hard look at the latest quarter should keep us anchored in reality, and then some P/E ratio points can be added to reflect optimism about profit growth in the next few years; add as many points as you are comfortable with.
Biogen reported on the first quarter of 2013 last Thursday. Revenue of $1.415 billion was up 9.5% from Q1 2012, which is quite good and means a fair P/E ratio should be above the market average. GAAP EPS was $1.79, up 43% y/y; now that should be worth some a P/E ratio well above market. Ballpark it at 30 to 1.
Guidance is for 2013 GAAP EPS of $6.69 to $6.90. Given that non-GAAP guidance is $7.80 to $7.90, let's use $7.00 and multiply by 30. That gives us $210 per share, not much off today's auction price.
So my ballpark estimation is that even at this price BIIB is still a good value. Included in the price are estimated 2013 profits. The pipeline of new drugs revenue and profits won't kick in substantially until 2014. I would expect BIIB to end 2014 in a higher price band, depending on the details of new product ramps.
I am inclined to hold my BIIB and, if I need to sell stock because I spot another opportunity as good as Biogen was in 2008, I could probably find something else to sell. Most likely I will leave BIIB off the leash until it again becomes a risk management problem from being too large a percentage of my portfolio. If I am wrong and it falls in the short run, or becomes a smaller percentage of my portfolio again because something else runs up, I might even buy more.
Keep diversified!
Disclaimer: I own share of BIIB and reserve the right to sell them or buy more at any time, even though I currently have no plans to change my position.
See also:
My Biogen Idec main analyst conferences page.
My BIIB Q1 2013 conference notes
www.biogenidec.com
Monday, August 13, 2012
3 NASDAQ 100 Biotechs: Gilead, Celgene, Biogen Idec
When I wrote about Gilead Sciences (GILD), on July 26, 2011, I said "A convergence of factors is driving Gilead profits higher. This trend should accelerate in 2012 and continue through at least 2015." [See Gilead Sciences Readies Pipeline]. Gilead stock that day closed at $42.16. This morning GILD opened at $56.42. While I am a long-term investor, it is encouraging to see these short-term results.
The forward-looking story is now largely about curing Hepatitis C and refreshing Gilead's market-dominating anti-HIV franchise, but first the backward-looking numbers.
In Q2 revenue was $2.41 billion, up 6% sequentially from $2.28 billion and up 13% from $2.14 billion in the year-earlier quarter. GAAP net income was $711.6 million, up 61% sequentially from $442.0 million, but down 5% from $746.2 million in the year-earlier quarter. GAAP earnings per share (EPS) were $0.91, up 60% sequentially from $0.57, but down 2% from $0.93 year-earlier. Eliminating one-time and non-cash items, Non-GAAP EPS was $0.99, up 9% sequentially from $0.91, but down 1% from $1.00 year-earlier.
The y/y EPS showing may make you wonder why the stock is up so much. Bringing the new HIV drugs to the FDA and the hepatitis drugs through clinical trials is adding to expenses. The price of the stock had been beaten down because of fears of expiring patents. The increased revenue promises a healthy dose of future profits since it now appears the HIV franchise will remain strong and hep c revenues may kick in as early as 2014. Recent Phase II hep c trials have been encouraging. The goal is to have a multi-agent, highly effective once-a-day tablet that will completely cure hepatitis C over a reasonably short period of time.
Gilead's P/E Ratio? Just over 17. It's a bargain.
Celgene (CELG) also is generating healthy profits while getting ready to introduce blockbuster therapies over the next few years.
Celgene Q2 revenue was $1.37 billion, up 8% sequentially from $1.27 million and up 16% from $1.18 billion year-earlier. GAAP net income was $367.4 million, down 8% sequentially from $401.5 million but up 32% from $279.2 million year-earlier. GAAP EPS (earnings per share) were $0.82, down 9% sequentially from $0.90, but up 39% from $0.59 year-earlier.
With a 39% y/y growth in GAAP EPS, you might think Celgene would be flying with a higher P/E ratio. Is is just GAAP accounting? No, non-GAAP EPS in Q2 was $1.22, up 13% sequentially from $1.08 and up 37% from $0.89 year-earlier.
Celgene closed a bit down today at $71.85, but a year ago it was selling for under $55. Its P/E Ratio is near 21.
The two new Celgene drugs that could produce revenue in 2013 are Pomalidomide for relapsed and refractory multiple myeloma and Apremilast for psoriatic arthritis and psoriasis. Safety and efficacy look good for both drugs, but there is always a chance that the FDA will disapprove or cause delays by asking for more clinical data.
Biogen Idec has already proven itself to be one of the big winners of late.
Biogen (BIIB) closed today at $144.54. In 2010 you could have bought it in the fifties most of the year. It has a higher P/E Ratio than Celgene or Gilead at just over 26.
So is BIIB more of a product for profit taking? [Disclaimer: I did already take some profits on this one, but it's gone up since then.]
Q2 revenue was $1.421 billion, up 10% sequentially from $1.292 billion and up 17.5% from $1.209 billion in the year-earlier quarter. GAAP net income was $386.8 million, up 28% sequentially from $302.7 million and up 34% from $288.0 million year-earlier. GAAP EPS (earnings per share) were $1.61, up 29% sequentially from $1.25 and up 36% from $1.18 year-earlier.
That alone would seem to justify the P/E, but like Celgene and Gilead, Biogen has a pipeline that could mint money for investors. The first one coming up for an FDA decision is BG-12 (dimethyl fumarate), an oral therapy for multiple sclerosis. The data looks good and a positive FDA decision would mean a commercial launch this year.
While each of these stocks has its risks, as a group they have a large number of profitable drugs and a large number of therapies in their pipelines. Holding all three minimizes risk. They are all in the NASDAQ 100.
Keep Diversified!
Disclaimer: I am a long-term investor in Gilead Sciences, Celgene, and Biogen Idec. I will not trade in the stock for a week from today.
See also:
my Gilead Sciences Q2 2012 analyst call summary
Celgene Q2 2012 analyst call summary
Biogen Idec Q2 2012 analyst call summary
The forward-looking story is now largely about curing Hepatitis C and refreshing Gilead's market-dominating anti-HIV franchise, but first the backward-looking numbers.
In Q2 revenue was $2.41 billion, up 6% sequentially from $2.28 billion and up 13% from $2.14 billion in the year-earlier quarter. GAAP net income was $711.6 million, up 61% sequentially from $442.0 million, but down 5% from $746.2 million in the year-earlier quarter. GAAP earnings per share (EPS) were $0.91, up 60% sequentially from $0.57, but down 2% from $0.93 year-earlier. Eliminating one-time and non-cash items, Non-GAAP EPS was $0.99, up 9% sequentially from $0.91, but down 1% from $1.00 year-earlier.
The y/y EPS showing may make you wonder why the stock is up so much. Bringing the new HIV drugs to the FDA and the hepatitis drugs through clinical trials is adding to expenses. The price of the stock had been beaten down because of fears of expiring patents. The increased revenue promises a healthy dose of future profits since it now appears the HIV franchise will remain strong and hep c revenues may kick in as early as 2014. Recent Phase II hep c trials have been encouraging. The goal is to have a multi-agent, highly effective once-a-day tablet that will completely cure hepatitis C over a reasonably short period of time.
Gilead's P/E Ratio? Just over 17. It's a bargain.
Celgene (CELG) also is generating healthy profits while getting ready to introduce blockbuster therapies over the next few years.
Celgene Q2 revenue was $1.37 billion, up 8% sequentially from $1.27 million and up 16% from $1.18 billion year-earlier. GAAP net income was $367.4 million, down 8% sequentially from $401.5 million but up 32% from $279.2 million year-earlier. GAAP EPS (earnings per share) were $0.82, down 9% sequentially from $0.90, but up 39% from $0.59 year-earlier.
With a 39% y/y growth in GAAP EPS, you might think Celgene would be flying with a higher P/E ratio. Is is just GAAP accounting? No, non-GAAP EPS in Q2 was $1.22, up 13% sequentially from $1.08 and up 37% from $0.89 year-earlier.
Celgene closed a bit down today at $71.85, but a year ago it was selling for under $55. Its P/E Ratio is near 21.
The two new Celgene drugs that could produce revenue in 2013 are Pomalidomide for relapsed and refractory multiple myeloma and Apremilast for psoriatic arthritis and psoriasis. Safety and efficacy look good for both drugs, but there is always a chance that the FDA will disapprove or cause delays by asking for more clinical data.
Biogen Idec has already proven itself to be one of the big winners of late.
Biogen (BIIB) closed today at $144.54. In 2010 you could have bought it in the fifties most of the year. It has a higher P/E Ratio than Celgene or Gilead at just over 26.
So is BIIB more of a product for profit taking? [Disclaimer: I did already take some profits on this one, but it's gone up since then.]
Q2 revenue was $1.421 billion, up 10% sequentially from $1.292 billion and up 17.5% from $1.209 billion in the year-earlier quarter. GAAP net income was $386.8 million, up 28% sequentially from $302.7 million and up 34% from $288.0 million year-earlier. GAAP EPS (earnings per share) were $1.61, up 29% sequentially from $1.25 and up 36% from $1.18 year-earlier.
That alone would seem to justify the P/E, but like Celgene and Gilead, Biogen has a pipeline that could mint money for investors. The first one coming up for an FDA decision is BG-12 (dimethyl fumarate), an oral therapy for multiple sclerosis. The data looks good and a positive FDA decision would mean a commercial launch this year.
While each of these stocks has its risks, as a group they have a large number of profitable drugs and a large number of therapies in their pipelines. Holding all three minimizes risk. They are all in the NASDAQ 100.
Keep Diversified!
Disclaimer: I am a long-term investor in Gilead Sciences, Celgene, and Biogen Idec. I will not trade in the stock for a week from today.
See also:
my Gilead Sciences Q2 2012 analyst call summary
Celgene Q2 2012 analyst call summary
Biogen Idec Q2 2012 analyst call summary
Wednesday, November 2, 2011
Biogen Idec: Q3 Clues to Value
When I wrote "Biogen Idec PML Test Approved in Europe, Changing Tysabri Outlook" on March 15, 2011, the price per share of BIIB was $69.56. When I wrote "Biogen Idec, Is there more Value?" on July 11, 2011, it closed at $105.53, having backed off its recent 52 week high of $109.63. Quite a run. It is headed up today after closing at $114.23 yesterday, so at least those wise people who are in the stock market these days think the answer is yes, there is still more value to be had from Biogen.
So, the eternal investor questions: did something change? Does the run up reflect value that was already there back in March? Could this be another momentum run unjustified by fundamentals? Could there be even more value in the stock?
We have had a number of recent data points to inform our views. BG-12, an oral agent for multiple sclerosis (MS), produced Phase III clinical results that should gain marketing approval from the FDA (of course, there is no guarantee of that). Biogen is generally held to sell the most effective MS drugs, but recently Gilenya by Novartis, became the first oral agent on the market.
In addition Daclizumab HYP showed good Phase 2b trial results. Dexpramipexole for Lou Gehrig's (ALS) disease Phase III trial became fully enrolled recently.
Third quarter (Q3) results released on October 28, along with the analyst conference call, demonstrated that current therapies are still ramping revenues. Biogen Idec's two multiple sclerosis (MS) blockbuster drugs are Avonex, with revenues in Q3 of $682 million, up 6% y/y, and Tysabri, with revenues of $277 million, up 26% y/y. Avonex has been around a long time and dominates the market, but its sales had flattened until the PEN was recently introduced, which makes administering it much easier. On June 22 Biogen had announced the EU approved including JCV status as a risk factor for Tysabri, which we presumed would happen in March. The risk of death or severe injury from PML, a result of JCV getting out of control when immune responses are suppressed (immune responses are the cause of MS), had been a big problem for Biogen. Now patients can test to find out if they are infected with JCV or not and with the help of their doctors make appropriate decisions about the risks versus the benefits of Tysabri.
Given all this good news and the big run up in 2011, are we at a just-right stock price? Of course next year's price will depend on how revenues and profits ramp (or don't) in 2012, and what the outlook looks like for 2013.
I will be surprised if Tysabri revenue growth does not accelerate in the second half of 2012 if BG-12 comes online. I am would not sell the stock in the current price band, and believe BIIB is currently a good bet for new money. However, in aside to the usual macroeconomic and stock market risks, all therapies run some risk from new adverse reactions being discovered and from current and future competing products.
At this point Biogen pays no dividend, but is certainly a profitable enough company that it could. It would also show management's confidence in the company's future. They spend a lot on R&D, over $300 million (GAAP) in Q3, and have a lot of cash, $2.9 billion, and a lot of non-GAAP net income, $395 million in Q3. They do use cash for stock buy backs and to acquire promissing pipeline candidates.
Disclaimer: I am long Biogen Idec. I have no plans to buy or sell in the next 3 days, but do sell stocks I feel have become overpriced.
See also http://www.biogenidec.com/
So, the eternal investor questions: did something change? Does the run up reflect value that was already there back in March? Could this be another momentum run unjustified by fundamentals? Could there be even more value in the stock?
We have had a number of recent data points to inform our views. BG-12, an oral agent for multiple sclerosis (MS), produced Phase III clinical results that should gain marketing approval from the FDA (of course, there is no guarantee of that). Biogen is generally held to sell the most effective MS drugs, but recently Gilenya by Novartis, became the first oral agent on the market.
In addition Daclizumab HYP showed good Phase 2b trial results. Dexpramipexole for Lou Gehrig's (ALS) disease Phase III trial became fully enrolled recently.
Third quarter (Q3) results released on October 28, along with the analyst conference call, demonstrated that current therapies are still ramping revenues. Biogen Idec's two multiple sclerosis (MS) blockbuster drugs are Avonex, with revenues in Q3 of $682 million, up 6% y/y, and Tysabri, with revenues of $277 million, up 26% y/y. Avonex has been around a long time and dominates the market, but its sales had flattened until the PEN was recently introduced, which makes administering it much easier. On June 22 Biogen had announced the EU approved including JCV status as a risk factor for Tysabri, which we presumed would happen in March. The risk of death or severe injury from PML, a result of JCV getting out of control when immune responses are suppressed (immune responses are the cause of MS), had been a big problem for Biogen. Now patients can test to find out if they are infected with JCV or not and with the help of their doctors make appropriate decisions about the risks versus the benefits of Tysabri.
Given all this good news and the big run up in 2011, are we at a just-right stock price? Of course next year's price will depend on how revenues and profits ramp (or don't) in 2012, and what the outlook looks like for 2013.
I will be surprised if Tysabri revenue growth does not accelerate in the second half of 2012 if BG-12 comes online. I am would not sell the stock in the current price band, and believe BIIB is currently a good bet for new money. However, in aside to the usual macroeconomic and stock market risks, all therapies run some risk from new adverse reactions being discovered and from current and future competing products.
At this point Biogen pays no dividend, but is certainly a profitable enough company that it could. It would also show management's confidence in the company's future. They spend a lot on R&D, over $300 million (GAAP) in Q3, and have a lot of cash, $2.9 billion, and a lot of non-GAAP net income, $395 million in Q3. They do use cash for stock buy backs and to acquire promissing pipeline candidates.
Disclaimer: I am long Biogen Idec. I have no plans to buy or sell in the next 3 days, but do sell stocks I feel have become overpriced.
See also http://www.biogenidec.com/
Sunday, October 9, 2011
Earnings Preview: AMD, AKAM, GILD, BIIB, CELG
Earnings season is upon us again. Of the stocks I watch most closely (in this case because I own some of each of them), Akamai (AKAM) has scheduled its analyst conference for October 26, and Advanced Micro Devices (AMD) is on October 27. Gilead Sciences (GILD), Celgene (CELG), and Biogen Idec (BIIB) should also report before month's end, but have not yet set dates.
While the information in analyst conferences comes from management, and so can be biased, it is still essential listening for serious investors. At the end sell-side analysts are allowed to ask questions (some micro-caps even let investors ask questions), and on occasion an answer to a question can give important insights into the company. I take notes while I listen and even post them on the web; listen to management for a couple of years and you may be able to tell a lot from the way they answer or evade questions. Going back a few years and checking on how management's predictions worked out can also be illuminating.
Akamai typically is a high P/E stock that has to justify that ratio by showing continuous growth. Many companies have tried to compete with Akamai at accelerated delivery of web content, yet over a decade later Akamai still has incredible market share and has branched out into adjacent businesses like cloud security. Pricing has been an issue lately. Look to see if Akamai's volume of business is growing fast enough to compensate for falling prices. Q3 is a slowish quarter for content delivery, with a big bump coming from e-commerce in Q4, so Q4 guidance is also a key indicator of the health of this business.
AMD already pre-announced, sending the stock price into free-fall. This was as I predicted in AMD at Earnings Crossroad, but worse. The good side of the news is demand for AMD's new server and APU chips is strong. What we want to know from management is how strong is the demand, and how quickly can they gear up chip production to meet the demand.
Biogen Idec (BIIB) guided to low to mid single digit revenue growth over 2011, which for Q3 would run to roughtly $1.2 billion. Tysabri sales over $280 million would be a positive indicator, but the key question is data or FDA approvals for late-pipeline drugs like BG-12 or Daclizumab for multiple sclerosis, which are likely to be announced on other occasions.
Gilead (GILD) is a cash cow that has a low P/E due to patents expiring on some of its anti-viral drugs over the next decade. If management would pay a dividend, the value of the franchise would be more obvious. They are doing a lot of research on new anti-viral compounds that could kick growth into high gear again if approved. Expect something over $2 billion in revenue, $940 million in cash flow from operations. The key issue would be timelines for Endurant and and the "Quad" regimen. Don't expect the stock to budge much in this market until they pay a dividend or announce positive Phase III data for a hepatitis C multi-drug therapy (they are only in Phase II, so it will be a while).
Celgene (CELG) is another cash cow, but with a rapid revenue and profit growth rate (and a higher P/E). Look for Revlimid revenues over $800 million, Vidaza over $165 million or Abraxane, their newest drug, revenues breaking though $100 million in the quarter. Celgene has a pipeline of potential drugs that is so extensive it would take several articles just to go over them. See Celgene drug pipeline for a list. Unless they mostly strike out, anyone who does not buy Celgene at today's price will wish they had in five years, but long-term investors are hard to find in this market.
Disclaimer: I am long in all of these stocks.
While the information in analyst conferences comes from management, and so can be biased, it is still essential listening for serious investors. At the end sell-side analysts are allowed to ask questions (some micro-caps even let investors ask questions), and on occasion an answer to a question can give important insights into the company. I take notes while I listen and even post them on the web; listen to management for a couple of years and you may be able to tell a lot from the way they answer or evade questions. Going back a few years and checking on how management's predictions worked out can also be illuminating.
Akamai typically is a high P/E stock that has to justify that ratio by showing continuous growth. Many companies have tried to compete with Akamai at accelerated delivery of web content, yet over a decade later Akamai still has incredible market share and has branched out into adjacent businesses like cloud security. Pricing has been an issue lately. Look to see if Akamai's volume of business is growing fast enough to compensate for falling prices. Q3 is a slowish quarter for content delivery, with a big bump coming from e-commerce in Q4, so Q4 guidance is also a key indicator of the health of this business.
AMD already pre-announced, sending the stock price into free-fall. This was as I predicted in AMD at Earnings Crossroad, but worse. The good side of the news is demand for AMD's new server and APU chips is strong. What we want to know from management is how strong is the demand, and how quickly can they gear up chip production to meet the demand.
Biogen Idec (BIIB) guided to low to mid single digit revenue growth over 2011, which for Q3 would run to roughtly $1.2 billion. Tysabri sales over $280 million would be a positive indicator, but the key question is data or FDA approvals for late-pipeline drugs like BG-12 or Daclizumab for multiple sclerosis, which are likely to be announced on other occasions.
Gilead (GILD) is a cash cow that has a low P/E due to patents expiring on some of its anti-viral drugs over the next decade. If management would pay a dividend, the value of the franchise would be more obvious. They are doing a lot of research on new anti-viral compounds that could kick growth into high gear again if approved. Expect something over $2 billion in revenue, $940 million in cash flow from operations. The key issue would be timelines for Endurant and and the "Quad" regimen. Don't expect the stock to budge much in this market until they pay a dividend or announce positive Phase III data for a hepatitis C multi-drug therapy (they are only in Phase II, so it will be a while).
Celgene (CELG) is another cash cow, but with a rapid revenue and profit growth rate (and a higher P/E). Look for Revlimid revenues over $800 million, Vidaza over $165 million or Abraxane, their newest drug, revenues breaking though $100 million in the quarter. Celgene has a pipeline of potential drugs that is so extensive it would take several articles just to go over them. See Celgene drug pipeline for a list. Unless they mostly strike out, anyone who does not buy Celgene at today's price will wish they had in five years, but long-term investors are hard to find in this market.
Disclaimer: I am long in all of these stocks.
Monday, July 11, 2011
Biogen Idec (BIIB) Valuation Thoughts
When I wrote "Biogen Idec PML Test Approved in Europe, Changing Tysabri Outlook" on March 15, 2011, the price per share of BIIB was $69.56. Today it closed at $105.53, having backed off its recent 52 week high of $109.63. Quite a run. So, the eternal investor questions: did something change? Does the run up reflect value that was already there back in March? Could this be another momentum run unjustified by fundamentals? Could there be even more value in the stock?
Biogen Idec's two multiple sclerosis (MS) blockbuster drugs are Avonex, with revenues in Q4 2010 of $654 million, and Tysabri, with revenues of $242 million. Also Rituxan generated $258 million. As I wrote earlier, most investors and analysts expect Tysabri revenues to rise now that patients can be pre-tested for JCV. Trailing earnings are $4.35 per share, so the current price/earnings (PE) ratio, while not real high, does anticipate solid earnings growth. This is despite competition from new MS therapies, notably Gilenya by Novartis, which is the first oral treatment for the disease, but which was not as effective as Tysabri in clinical trials.
I have always argued that there is undiscovered value in the earlier stages of the Biogen Idec pipeline, but that situation is little changed since March. With 8 indications in Phase III trials, chances are that several new therapies will be approved over the next couple of years. However, Biogen does plan to narrow the scope of its development program, eliminating oncology and cardiovascular candidates to focus on immunology. This should reduce costs in the short run.
On June 7 Biogen announced the EU had approved its Avonex PEN, which is a single-use injection device which will make taking the drug more convenient for MS patients. Nice, but not responsible for a $40 stock run-up.
On June 22 Biogen announced the EU approved including JCV status as a risk factor for Tysabri, which we presumed would happen in March.
On July 3, after the run-up, Biogen announced some nice science research on the role of death receptor-6 (DR6) in MS. Nice, but probably ten years away from adding to revenues, if it should work out.
It is fair to conclude that the price of BIIB had been low because of fears about Tysabri revenue being permanently stalled by the JCV complication. Those fears stopped being justified as we learned more about JCV and its detection. It is remarkable how a rising stock price can make fear evaporate.
So are we at a just-right stock price? Of course next year's price will depend on how revenues and profits ramp (or don't) in 2011, and what the outlook looks like for 2013.
During 2010, when Tysabri was still under suspicion, Biogen grew total revenues grew to $4.72 billion from $4.38 billion in 2009. That is just 7.7% annual growth. But earnings per share grew 17.6%. In the latest reported quarter, Q1, revenue grew 9% y/y.
I will be surprised if Tysabri revenue growth does not accelerate. I am fine holding the stock in the current price band, but I would want to see actual revenue and profit acceleration before feeling a higher band is a safe bet.
At this point Biogen pays no dividend, but is certainly a profitable enough company that it could. It would also show management's confidence in the company's future.
See also http://www.biogenidec.com/
Monday, April 18, 2011
Analyst Calls this week: Intuitive Surgical, Gilead, Biogen, AMD
Earnings season begins in earnest for me this week. As usual I will be listening to analyst conference calls. All serious investors should, but then again that is time consuming. I take notes and post them on the web for my own and others references. Here are this week's calls and links for my summaries. The pages are up, so you can click on the links, bookmark the pages, and come back when the summaries are ready, often a few minutes after the conference ends, but sometimes up to a day later due to my work load.
Intuitive Surgical (ISRG) analyst call, Tuesday, April 19, 2011 at 1:30 PM
Gilead Sciences (GILD) analyst call, Wednesday, April 20, 2011 at 2:30 PM
Biogen Idec (BIIB) analyst call, Thursday, April 21, 2011 at 1:30 PM
AMD (AMD) analyst call, Thursday, April 21, 2011 at 2:00 PM
I currently have positions in Gilead, Biogen and AMD, but not in Intuitive Surgical.
Thursday, September 30, 2010
Biogen Idec (BIIB) Hemophilia Therapies
Biogen Idec is known for its multiple sclerosis therapies Tysabri, Avonex, and Rituxan. It also has an extensive pipeline of potential therapies in immunology, oncology, cardio and hemophilia. Yesterday Biogen (BIIB) held a three hour conference on its hemophilia therapies. Here I'll summarize some of the key points that were made. You can listen to the entire conference from a link at the Biogen Idec Investor Events page.
Hemophilia (alt spelling: haemophilia), the chronic inability of the blood to clot, is a rare, but no extremely rare, disease: under 20,000 people have it in the United States. It is typically caused by a defect in one of two blood clotting proteins: coagulation factor VIII in hemophilia A or factor IX in hemophilia B.
Managing hemophilia usually involves infusing the clotting factor into the blood. This can be done when there is an incident that would cause bleeding, or it can be done on a regular basis as a prophylactic. Over time most U.S. patients have moved towards prophylactic use of either natural or recombinant factors. However, the clotting factors have a lifetime of only a few days in the blood. So for hemophilia A, the most common type, infusions are typically done three times a week or every other day. For hemophilia B, two to three times a week is typical.
A variety of pharmaceutical and biotechnology players have sought to extend the life of coagulation factors in the blood. Biogen appears to be on track to be the first company to deliver such a therapy. The initial development was done by Syntonix, which Biogen acquired in 2007. The long-acting factors were created by fusing a recombinant factor of each type with Fc antibody fragments. The rFactor binds to cells that line the blood vessels, but can be re-released back into circulation without being degraded.
Long Acting rFactor IX for hemophilia B is has started a Phase 3 trial after having been shown to be safe and effective in Phase 2. As always, Phase 3 trials involve far more patients than Phase 2 trials, so issues can arise that are unforeseen. That said, given that other Fc-fusion therapies have been safe and recombinant factors are safe, the prospects are pretty good.
Long Acting rFactor VIII for hemophilia A, the more common type, has completed a Phase 2 trial. While the data has not been released, it is good enough that management is preparing for a Phase 3 trial.
If the Phase III trials are successful, it is likely patients can be treated just once a week or so. That would be a tremendous benefit to patients who must being infused as babies and continue the process for their entire lives. It would likely encourage more patients to use therapy prophylacticly.
Current therapy is rather expensive (see hemophilia financial issues), another reason some patients do not dose regularly. I don't know how Biogen will initially price their version, but costs could be reduced in the long run because of the less frequent dosing needed.
For investors, gaining FDA approval for long-acting hemophilia therapy would be an obvious plus and might help overcome doubts due to possible upcoming MS competition from Novartis's Gilenya (fingolimod).
Keep diversified!
See also:
my Biogen Idec Medical Analyst Conference Call summaries
Biogen Idec Hemophilia site
Hemophilia (alt spelling: haemophilia), the chronic inability of the blood to clot, is a rare, but no extremely rare, disease: under 20,000 people have it in the United States. It is typically caused by a defect in one of two blood clotting proteins: coagulation factor VIII in hemophilia A or factor IX in hemophilia B.
Managing hemophilia usually involves infusing the clotting factor into the blood. This can be done when there is an incident that would cause bleeding, or it can be done on a regular basis as a prophylactic. Over time most U.S. patients have moved towards prophylactic use of either natural or recombinant factors. However, the clotting factors have a lifetime of only a few days in the blood. So for hemophilia A, the most common type, infusions are typically done three times a week or every other day. For hemophilia B, two to three times a week is typical.
A variety of pharmaceutical and biotechnology players have sought to extend the life of coagulation factors in the blood. Biogen appears to be on track to be the first company to deliver such a therapy. The initial development was done by Syntonix, which Biogen acquired in 2007. The long-acting factors were created by fusing a recombinant factor of each type with Fc antibody fragments. The rFactor binds to cells that line the blood vessels, but can be re-released back into circulation without being degraded.
Long Acting rFactor IX for hemophilia B is has started a Phase 3 trial after having been shown to be safe and effective in Phase 2. As always, Phase 3 trials involve far more patients than Phase 2 trials, so issues can arise that are unforeseen. That said, given that other Fc-fusion therapies have been safe and recombinant factors are safe, the prospects are pretty good.
Long Acting rFactor VIII for hemophilia A, the more common type, has completed a Phase 2 trial. While the data has not been released, it is good enough that management is preparing for a Phase 3 trial.
If the Phase III trials are successful, it is likely patients can be treated just once a week or so. That would be a tremendous benefit to patients who must being infused as babies and continue the process for their entire lives. It would likely encourage more patients to use therapy prophylacticly.
Current therapy is rather expensive (see hemophilia financial issues), another reason some patients do not dose regularly. I don't know how Biogen will initially price their version, but costs could be reduced in the long run because of the less frequent dosing needed.
For investors, gaining FDA approval for long-acting hemophilia therapy would be an obvious plus and might help overcome doubts due to possible upcoming MS competition from Novartis's Gilenya (fingolimod).
Keep diversified!
See also:
my Biogen Idec Medical Analyst Conference Call summaries
Biogen Idec Hemophilia site
Wednesday, September 22, 2010
Biogen Idec, the MS market, and Gilenya
Multiple sclerosis (MS) is a disabling and eventually deadly disease in which the human immune system attacks otherwise healthy nervous tissues. It affects about 2.5 million people worldwide including about 400,000 in the U.S., where prevalence is much higher than the global average. Today the FDA announced it had approved Novartis's Gilenya (fingolimod) as the first oral treatment for MS.
Biogen Idec stock has sold at depressed prices for several years now, despite the company's high level of profitability. The long-term, main reason for this is that Tysabri (natalizumab), which is the most effective MS drug ever developed, has the unfortunate effect of allowing a virus that is resident (and normally harmless) in many people's brains to become active, causing progressive multifocal leukoencephalopathy (PML), which can be fatal. All Tysabri patients are now monitored for symptoms of PML, but there is no doubt that many doctors and patients have refused the drug because of the side effect.
The problem with Tysabri, and with MS drugs in general, is that the cure involves suppressing the immune system. Therapies less effective than Tysabri are not as good at suppressing the immune system; Biogen's Avonex is an example. Other partially effective treatments for MS include corticosteroids, interferons (Avonex is one), Copaxone (which requires once-a-day injection), and Novantrone (which has harmful side-effects on the heart, and is somewhat of a last resort).
Gilenya acts by keeping lymphocytes in lymph nodes, so that they do not attack the central nervous system in MS. But that means that, like all immune system suppressors, it is likely to occasionally prevent the immune system from doing its job of controlling infections. It seems to have a side effect of inducing basal-cell carcinomas as well as opportunistic infections. "Cases of serious eye problems (macular edema) have occurred in patients taking the drug and an ophthalmologic evaluation is recommended." In trials it reduces relapses of MS by over 50%, which is a good number, but not as effective as Tysabri's.
So what Gilenya has going for it is that it can be administered orally. Tysabri is given by infusion, a less convenient method to be sure.
Meanwhile Biogen Idec has an oral MS medication, BG-12, in Phase III trials. Data should be out in 2011. BG-12 Phase II data was reported in terms of decreasing lesions caused by MS, also stating that relapse rates decreased, and frequency of infection was low. It should be noted, however, that short-term studies have typically underestimated the effects of long-term immune system repression on infection rates and mortality.
Since BG-12 has a novel mechanism of action, which "defends against oxidative-stress induced neuronal death, protects the blood-brain barrier, and supports maintenance of myelin integrity," if it has good phase III results and is approved by the FDA, there will be reason for prescribing it apart from its oral administration.
For investors, in short today's reaction to the FDA approval of Gilenya is overblown. Biogen sells at a very attractive P/E. Biogen Idec's strong pipeline of potential therapies promise to expand its overall market share over time.
At this point, however, I would suggest that given its profitability, Biogen Idec should pay a dividend. I own Biogen (BIIB) stock and believe paying a dividend would compensate for the low P/E ratio while waiting to see if I am right that revenues and profits will indeed continue to ramp nicely in 2011 and 2012.
See also my Biogen Idec Analyst Conference Call summaries.
William P. Meyers
Biogen Idec stock has sold at depressed prices for several years now, despite the company's high level of profitability. The long-term, main reason for this is that Tysabri (natalizumab), which is the most effective MS drug ever developed, has the unfortunate effect of allowing a virus that is resident (and normally harmless) in many people's brains to become active, causing progressive multifocal leukoencephalopathy (PML), which can be fatal. All Tysabri patients are now monitored for symptoms of PML, but there is no doubt that many doctors and patients have refused the drug because of the side effect.
The problem with Tysabri, and with MS drugs in general, is that the cure involves suppressing the immune system. Therapies less effective than Tysabri are not as good at suppressing the immune system; Biogen's Avonex is an example. Other partially effective treatments for MS include corticosteroids, interferons (Avonex is one), Copaxone (which requires once-a-day injection), and Novantrone (which has harmful side-effects on the heart, and is somewhat of a last resort).
Gilenya acts by keeping lymphocytes in lymph nodes, so that they do not attack the central nervous system in MS. But that means that, like all immune system suppressors, it is likely to occasionally prevent the immune system from doing its job of controlling infections. It seems to have a side effect of inducing basal-cell carcinomas as well as opportunistic infections. "Cases of serious eye problems (macular edema) have occurred in patients taking the drug and an ophthalmologic evaluation is recommended." In trials it reduces relapses of MS by over 50%, which is a good number, but not as effective as Tysabri's.
So what Gilenya has going for it is that it can be administered orally. Tysabri is given by infusion, a less convenient method to be sure.
Meanwhile Biogen Idec has an oral MS medication, BG-12, in Phase III trials. Data should be out in 2011. BG-12 Phase II data was reported in terms of decreasing lesions caused by MS, also stating that relapse rates decreased, and frequency of infection was low. It should be noted, however, that short-term studies have typically underestimated the effects of long-term immune system repression on infection rates and mortality.
Since BG-12 has a novel mechanism of action, which "defends against oxidative-stress induced neuronal death, protects the blood-brain barrier, and supports maintenance of myelin integrity," if it has good phase III results and is approved by the FDA, there will be reason for prescribing it apart from its oral administration.
For investors, in short today's reaction to the FDA approval of Gilenya is overblown. Biogen sells at a very attractive P/E. Biogen Idec's strong pipeline of potential therapies promise to expand its overall market share over time.
At this point, however, I would suggest that given its profitability, Biogen Idec should pay a dividend. I own Biogen (BIIB) stock and believe paying a dividend would compensate for the low P/E ratio while waiting to see if I am right that revenues and profits will indeed continue to ramp nicely in 2011 and 2012.
See also my Biogen Idec Analyst Conference Call summaries.
William P. Meyers
Wednesday, July 21, 2010
Gilead, Biogen Idec Second Quarter 2010 Reports
I covered the Gilead (GILD) and Biogen Idec (BIIB) analysts conferences yesterday, July 20, 2010, on my own account. I own stock in both.
You can read the press releases or listen to the recordings, but you can also read my extensive notes: Gilead Sciences Q2 2010 Analyst Conference Summary and Biogen Idec Q2 2010 Analyst Conference Summary.
That's what management said andr reported; here are my reactions. Overall, the biotechnology sector is very much alive, well, and undervalued. Biogen Idec, which specializes in treating multiple sclerosis, but is branching out, had 11% y/y revenue growth and 105% y/y GAAP net income growth.
In other words, profits more than doubled. And they were pretty impressive last year. More important, as time passes PML, a potentially deadly result of unleashing JC virus when the immune system is suppressed, is becoming much less of a problem. It looks like by 2011 it will be possible to screen patients for the presense of JC. Those with out the virus can be expected to switch to Tysabri at a far more rapid rate than we are seeing now. Those who do have JC will be monitored carefully if they take Tysabri; that pools risk also should trend down.
Biogen has an interesting pipeline that could start bearing fruit in 2012. They are diversifying and have the cash flow to buy and develop new products. There will be winners and losers, of course, there always are in biotechnology, but Biogen is now big enough to be sure to have winners in its pipeline. That's what I like to see. I am willing to gamble, on occasion, on a single therapy like I did with Dendreon (DNDN), but most of my portfolio is in companies that have shown they can generate profits.
Gilead has been plagued by analyst's concerns that its anti-viral drugs will go off patent eventually and be undercut by generics. Q2 results again demonstrated the astonishing present value of Gildead: revenues up 17% from year-earlier, net income up 25% y/y. And GAAP net income at $709 million was 36.8% of revenue of $1.93 billion. How often do you see that kind of picture?
The conference was all about the future. There has always been competition in anti-virals. The worry is that other companies are gunning for Gilead's leader-of-the-pack position. I agree with Gilead management, they have an advantage they are likely to keep for a decade or two, and in the meantime can use their giant pile of cash to diversify. Their anti-viral pills only need to be taken once a day; their rivals' best need to be taken twice a day. These pills need to be taken every day for the rest of a patient's life. Missing or delaying one of two daily doses can have serious consequences. So doctors are going to prescibe the one-a-day regimen unless they have a compelling reason to do otherwise.
Most likely scenario: Gilead is going to play in other pharmaceutical's sandboxes, not the other way around. The process will take years, and again not every therapy will get FDA approval or become a blockbuster. But Gilead is a growth and value stock wrapped in one.
Don't just take my word for it. Do your research. To help get started in biotech investing, try my biotechnology research links page.
You can read the press releases or listen to the recordings, but you can also read my extensive notes: Gilead Sciences Q2 2010 Analyst Conference Summary and Biogen Idec Q2 2010 Analyst Conference Summary.
That's what management said andr reported; here are my reactions. Overall, the biotechnology sector is very much alive, well, and undervalued. Biogen Idec, which specializes in treating multiple sclerosis, but is branching out, had 11% y/y revenue growth and 105% y/y GAAP net income growth.
In other words, profits more than doubled. And they were pretty impressive last year. More important, as time passes PML, a potentially deadly result of unleashing JC virus when the immune system is suppressed, is becoming much less of a problem. It looks like by 2011 it will be possible to screen patients for the presense of JC. Those with out the virus can be expected to switch to Tysabri at a far more rapid rate than we are seeing now. Those who do have JC will be monitored carefully if they take Tysabri; that pools risk also should trend down.
Biogen has an interesting pipeline that could start bearing fruit in 2012. They are diversifying and have the cash flow to buy and develop new products. There will be winners and losers, of course, there always are in biotechnology, but Biogen is now big enough to be sure to have winners in its pipeline. That's what I like to see. I am willing to gamble, on occasion, on a single therapy like I did with Dendreon (DNDN), but most of my portfolio is in companies that have shown they can generate profits.
Gilead has been plagued by analyst's concerns that its anti-viral drugs will go off patent eventually and be undercut by generics. Q2 results again demonstrated the astonishing present value of Gildead: revenues up 17% from year-earlier, net income up 25% y/y. And GAAP net income at $709 million was 36.8% of revenue of $1.93 billion. How often do you see that kind of picture?
The conference was all about the future. There has always been competition in anti-virals. The worry is that other companies are gunning for Gilead's leader-of-the-pack position. I agree with Gilead management, they have an advantage they are likely to keep for a decade or two, and in the meantime can use their giant pile of cash to diversify. Their anti-viral pills only need to be taken once a day; their rivals' best need to be taken twice a day. These pills need to be taken every day for the rest of a patient's life. Missing or delaying one of two daily doses can have serious consequences. So doctors are going to prescibe the one-a-day regimen unless they have a compelling reason to do otherwise.
Most likely scenario: Gilead is going to play in other pharmaceutical's sandboxes, not the other way around. The process will take years, and again not every therapy will get FDA approval or become a blockbuster. But Gilead is a growth and value stock wrapped in one.
Don't just take my word for it. Do your research. To help get started in biotech investing, try my biotechnology research links page.
Monday, February 15, 2010
Biogen Idec (BIIB) Revenue Lull
Biogen Idec (BIIB) reported Q4 2009 financial results and held its quarterly analysts conference last week. I used Biogen as an example in my Choosing a Biotech Stock series, and later chose to buy some myself, which I still own.
Biogen is in an interesting phase. Its revenue growth has slowed from the high levels of the past few years, to just 6% from the year-earlier quarter. At the same time, year over year, net income for the fourth quarter rose 48% to $305.6 million (GAAP).
So what is going on? The flat revenue is because Rituxan for rheumatoid arthritis revenues are expiring outside the U.S. Biogen will continue to sell Rituxan inside the U.S.
Compensating for that drop, we still have ramping sales of Tysabri for Multiple Sclerosis, which had revenues jump 39% from year-earlier. Tysabri is still being introduced internationally. It is something of a miracle drug for MS. Tysabri has very good profit margins. Biogen's older MS therapy, Avonex, had revenues up only 5% y/y. Tysabri had scared investors because of cases of PML associated with it, but recently the FDA announced that with Biogen's monitoring program for PML, the benfits of Tysabri outweigh any danger. Biogen is continuing to work to reduce the possibility of PML.
Biogen has an extensive pipeline of drugs that, if approved, could significantly increase its revenues and profits over the next decade. The first possible revenue boost would be from Fampridine for MS. Unlike Tysabri and Avonex, which work by suppressing the immune response that causes MS, Fampridine works by strengthening the signaling of intact nerve cells. It can give patients temporary control of their movements. This is likely to be very attractive to MS victims.
I continue to like Biogen, but its main value is over a long time from of 2 years or more. In the meantime I hope they either use the cash they are generating to pay a dividend or to acquire more quality drug candidates for development.
Analyst conferences coming up this week:
Applied Materials (AMAT) Wednesday
NVIDIA (NVDA) Wednesday
See also:
Q4 2009 Biogen Idec analyst conference summary
http://www.biogenidec.com/
Biogen is in an interesting phase. Its revenue growth has slowed from the high levels of the past few years, to just 6% from the year-earlier quarter. At the same time, year over year, net income for the fourth quarter rose 48% to $305.6 million (GAAP).
So what is going on? The flat revenue is because Rituxan for rheumatoid arthritis revenues are expiring outside the U.S. Biogen will continue to sell Rituxan inside the U.S.
Compensating for that drop, we still have ramping sales of Tysabri for Multiple Sclerosis, which had revenues jump 39% from year-earlier. Tysabri is still being introduced internationally. It is something of a miracle drug for MS. Tysabri has very good profit margins. Biogen's older MS therapy, Avonex, had revenues up only 5% y/y. Tysabri had scared investors because of cases of PML associated with it, but recently the FDA announced that with Biogen's monitoring program for PML, the benfits of Tysabri outweigh any danger. Biogen is continuing to work to reduce the possibility of PML.
Biogen has an extensive pipeline of drugs that, if approved, could significantly increase its revenues and profits over the next decade. The first possible revenue boost would be from Fampridine for MS. Unlike Tysabri and Avonex, which work by suppressing the immune response that causes MS, Fampridine works by strengthening the signaling of intact nerve cells. It can give patients temporary control of their movements. This is likely to be very attractive to MS victims.
I continue to like Biogen, but its main value is over a long time from of 2 years or more. In the meantime I hope they either use the cash they are generating to pay a dividend or to acquire more quality drug candidates for development.
Analyst conferences coming up this week:
Applied Materials (AMAT) Wednesday
NVIDIA (NVDA) Wednesday
See also:
Q4 2009 Biogen Idec analyst conference summary
http://www.biogenidec.com/
Monday, October 27, 2008
Biogen Idec (BIIB) Growth Accelerating
Biogen Idec just keeps growing revenues and profits. At a time when the entire stock market is melting down, smart people can make money (in the long run) by buying almost anything, but there is a lot of insurance in buying cash rich, rapidly growing companies like Biogen.
Biogen has a lot of cash (and marketable securities), over $2 billion at the end of Q3. Its non-GAAP (cash) net income was $288 million in Q3.
Aside from truly apocalyptic scenarios, I see no reason why profits should not continue to grow rapidly for the foreseeable future. 3rd quarter revenues were up 10% from the second quarter and up 38% from Q3 in 2007. GAAP net income was sequentially flat, but up 73% from $119 million last year, with GAAP EPS at $0.70.
For details of Biogen's Q3, see my Biogen Idec Analyst Conference Summary, Q3 2008.
There are three mostly-independent components to Biogen Idec's future growth. Its main revenue generators include two drugs for Multiple Sclerosis (MS), Avonex ($573 million Q3 sales) and Tysabri ($173 million Q3 sales). Avonex is the older drug, approved and marketed in the U.S., Europe, and many other countries. Tysabri, the newer, even more effective drug, is still in the global approval process. When MS patients switch to a new drug, they switch often switch to Tysabri. In terms of revenue, however, the main component at present is international expansion. It will take years for Tysabri to be approved and for sale in all the world's major markets. MS is a life-long disease at present; you can't stop taking your therapies without it starting to progress, though Tysabri seems to actually cause the disease to regress in many cases.
The second revenue and profit building leg is expanded indications for existing drugs. Rituxan, which had sales of $299 million in the quarter, has been approved for Non-Hodgkin's Lymphoma (NHL) and is in Phase III for Chronic Lymphocytic Leukemia (CLL). Tysabri is in a Phase I trial for multiple myeloma and was recently approved for treatment of Crohn's Disease.
The third leg is the pipeline, which is impressive. There are drugs in every stage of development from pre-clinical to Phase III, and Biogen has the cash to buy rights to promising therapies as well. There are five novel compounds in late stage (Phase III) registrational trials (BG-12, Lumiliximab, Galiximab, Lixivaptan, Adentri).
For those who don't following biotech batting averages, only a relatively few of the drugs that are tried in Phase I trials eventually get good Phase III results and are profitably brought to market. As with any other biotechnology or pharmaceutical company, BIIB will see drugs that don't live up to their early promise. That said, BIIB has a rather exceptional record in actually developing drugs that help patients enough to become revenue blockbusters. Some of BIIBs pipeline candidates will be approved and turn into profit engines in the future.
Every company's stock is risky. Drug candidates can fail, and even successful drugs can be driven off the market by rivals. BIIB should be bought only as part of a portfolio that makes sense to you.
The main risk that remains in BIIB (though I think it has already led to a discount in the stock price) is from the known adverse event associated with Tysabri, PML (Progressive Multifocal Leukoencephalopathy). This was a little-known disease until HIV infections became widespread, resulting in a large pool of people with suppressed immune systems. It is an opportunistic infection, rare even in immune-suppressed patients. There have been several PML cases in patients being treated with Tysabri. Doctors are warned to watch for PML symptoms when they prescribe Tysabri. PML can be deadly.
You might think that would kill sales of Tysabri, but it has not, because doctors and patients, or enough of them, are looking at the bigger picture. MS is an auto-immune disorder. Stopping it involves keying down the immune system. With the choice being between watching MS symptoms progress and taking a drug that stops the progression, most patients are going to want to take the drug. PML is a risk, but a small one, and if detected in time can be survivable. It is sad to have to make choices like that, but when you know you have MS, and what its progress will be if untreated, it is still the best choice for most people.
I hope you have some cash to buy stocks during this giant Wall Street Geniuses' fire sale, but in any case ...
Keep diversified.
More data:
Biogen Idec home page
Biogen has a lot of cash (and marketable securities), over $2 billion at the end of Q3. Its non-GAAP (cash) net income was $288 million in Q3.
Aside from truly apocalyptic scenarios, I see no reason why profits should not continue to grow rapidly for the foreseeable future. 3rd quarter revenues were up 10% from the second quarter and up 38% from Q3 in 2007. GAAP net income was sequentially flat, but up 73% from $119 million last year, with GAAP EPS at $0.70.
For details of Biogen's Q3, see my Biogen Idec Analyst Conference Summary, Q3 2008.
There are three mostly-independent components to Biogen Idec's future growth. Its main revenue generators include two drugs for Multiple Sclerosis (MS), Avonex ($573 million Q3 sales) and Tysabri ($173 million Q3 sales). Avonex is the older drug, approved and marketed in the U.S., Europe, and many other countries. Tysabri, the newer, even more effective drug, is still in the global approval process. When MS patients switch to a new drug, they switch often switch to Tysabri. In terms of revenue, however, the main component at present is international expansion. It will take years for Tysabri to be approved and for sale in all the world's major markets. MS is a life-long disease at present; you can't stop taking your therapies without it starting to progress, though Tysabri seems to actually cause the disease to regress in many cases.
The second revenue and profit building leg is expanded indications for existing drugs. Rituxan, which had sales of $299 million in the quarter, has been approved for Non-Hodgkin's Lymphoma (NHL) and is in Phase III for Chronic Lymphocytic Leukemia (CLL). Tysabri is in a Phase I trial for multiple myeloma and was recently approved for treatment of Crohn's Disease.
The third leg is the pipeline, which is impressive. There are drugs in every stage of development from pre-clinical to Phase III, and Biogen has the cash to buy rights to promising therapies as well. There are five novel compounds in late stage (Phase III) registrational trials (BG-12, Lumiliximab, Galiximab, Lixivaptan, Adentri).
For those who don't following biotech batting averages, only a relatively few of the drugs that are tried in Phase I trials eventually get good Phase III results and are profitably brought to market. As with any other biotechnology or pharmaceutical company, BIIB will see drugs that don't live up to their early promise. That said, BIIB has a rather exceptional record in actually developing drugs that help patients enough to become revenue blockbusters. Some of BIIBs pipeline candidates will be approved and turn into profit engines in the future.
Every company's stock is risky. Drug candidates can fail, and even successful drugs can be driven off the market by rivals. BIIB should be bought only as part of a portfolio that makes sense to you.
The main risk that remains in BIIB (though I think it has already led to a discount in the stock price) is from the known adverse event associated with Tysabri, PML (Progressive Multifocal Leukoencephalopathy). This was a little-known disease until HIV infections became widespread, resulting in a large pool of people with suppressed immune systems. It is an opportunistic infection, rare even in immune-suppressed patients. There have been several PML cases in patients being treated with Tysabri. Doctors are warned to watch for PML symptoms when they prescribe Tysabri. PML can be deadly.
You might think that would kill sales of Tysabri, but it has not, because doctors and patients, or enough of them, are looking at the bigger picture. MS is an auto-immune disorder. Stopping it involves keying down the immune system. With the choice being between watching MS symptoms progress and taking a drug that stops the progression, most patients are going to want to take the drug. PML is a risk, but a small one, and if detected in time can be survivable. It is sad to have to make choices like that, but when you know you have MS, and what its progress will be if untreated, it is still the best choice for most people.
I hope you have some cash to buy stocks during this giant Wall Street Geniuses' fire sale, but in any case ...
Keep diversified.
More data:
Biogen Idec home page
Tuesday, October 21, 2008
Gilead (GILD) Thrives Despite Downturn
Investors who own good, or even great, companies right now are often feeling bad about their investments because stock prices are low even for these companies. As far as I can tell, while some low stock prices are needed to factor in the troubles of the economy, in the case of great companies this is purely due to liquidity issues. People who know they own valuable stocks that should be kept because of their current value and future potential are being "forced" to sell them to maintain their own liquidity. Also, money flows into the stock market on a comparison basis; it will tend to flow into the (perceived) best bargains of the moment.
Gilead Sciences (GILD) showed it is a great company for shareholders when it reported on its third quarter on October 16, 2008. It is one of the most successful biotechnology companies because it developed and sells great antiviral products that target HIV infections and hepatitis. These drugs are not dispensable; people who need them buy them even in economic downturns. In addition, Gilead's drugs continue to replace competitors' drugs in these spaces.
Q3 revenues tell the story pretty well. They were $1.37 billion, up up 7% sequentially from $1.28 billion in Q2 and up 29% from $1.06 billion year-earlier. Earnings per share (EPS) were $0.52, up 13% sequentially from $0.46 and up 24% from $0.42 year-earlier.
There is no need to worry about liquidity at Gilead. They are sitting on top of $3.26 billion in cash and equivalents. Operating cash flows were $555 million for the quarter.
See my Gilead (GILD) analyst conference summary for Q3 2008 for more details.
Fortunately, I am not overextended and am gradually adding to my portfolio. It almost feels like stealing. After years of watching hedge fund managers tell the world what hot shots they were when all they were doing was leveraging credit into ordinary investments, picking their pockets while they are down feels pretty good. You can almost correlate how much of a stock was owned by hedge funds by viewing its price percentage decline this last year.
I own Gilead as part of a long term strategy. My one suggested change for management would be that they start paying a dividend. I prefer that over stock-buy backs. Dividends allow me to choose to diversify, or to take income, without having to sell stocks and pay capital gains.
Biogen Idec reported some very impressive results today. You can get a good picture of the current state of the company at me Biogen Idec (BIIB) analyst conference summary for Q3 2008.
More data:
http://www.gilead.com/
Gilead Sciences (GILD) showed it is a great company for shareholders when it reported on its third quarter on October 16, 2008. It is one of the most successful biotechnology companies because it developed and sells great antiviral products that target HIV infections and hepatitis. These drugs are not dispensable; people who need them buy them even in economic downturns. In addition, Gilead's drugs continue to replace competitors' drugs in these spaces.
Q3 revenues tell the story pretty well. They were $1.37 billion, up up 7% sequentially from $1.28 billion in Q2 and up 29% from $1.06 billion year-earlier. Earnings per share (EPS) were $0.52, up 13% sequentially from $0.46 and up 24% from $0.42 year-earlier.
There is no need to worry about liquidity at Gilead. They are sitting on top of $3.26 billion in cash and equivalents. Operating cash flows were $555 million for the quarter.
See my Gilead (GILD) analyst conference summary for Q3 2008 for more details.
Fortunately, I am not overextended and am gradually adding to my portfolio. It almost feels like stealing. After years of watching hedge fund managers tell the world what hot shots they were when all they were doing was leveraging credit into ordinary investments, picking their pockets while they are down feels pretty good. You can almost correlate how much of a stock was owned by hedge funds by viewing its price percentage decline this last year.
I own Gilead as part of a long term strategy. My one suggested change for management would be that they start paying a dividend. I prefer that over stock-buy backs. Dividends allow me to choose to diversify, or to take income, without having to sell stocks and pay capital gains.
Biogen Idec reported some very impressive results today. You can get a good picture of the current state of the company at me Biogen Idec (BIIB) analyst conference summary for Q3 2008.
More data:
http://www.gilead.com/
Friday, September 14, 2007
Choosing a Biotech Stock 3: Biogen Idec
In the first installment of this series I explained the situation that led me to decide to add another biotechnology stock to my portfolio. In the second installment I reviewed Gilead since it is a stock that I think is worth buying. Today I am going to analyse Biogen Idec (BIIB). Much of the information for the analysis I have already accumulated in my analyst conference summaries (See my BIIB page). Both Gilead and Biogen are in the Nasdaq 100.
Biogen is now a well-established company with healthy revenues ($773 in Q2 2007, up 8% sequentially and up 17% from year-earlier) and net income (GAAP $186 million, up 41% sequentially and up from a loss of $171 million year-earlier). Avonex for multiple sclerosis revenues were $462 million. Another blockbuster drug is Rituxan, which is sold by Genentech. Its revenues from that venture were $230 million in the quarter. Tysabri is a newer drug with $48 million in revenues in the quarter. Fumaderm showed its first revenues at $5 million, and BIIB garnered another $23 million from royalties.
Research and development costs are significant at $218 million as numerous clinical studies are underway to increase the scope of the Tysabri label. A setback was Europe disallowing Tysabri for Crone's Disease, which Biogen plans to appeal.
So aside from possible future growth in Avonex, Rituxan, and Tysabri sales, and its pipeline of possible new drugs, how does today's price look? Biogen Idec stock ended today at $65.42; the company has a market capitalization of $18.75 billion. The 52 week low for the stock is $42.51, so anyone who bought at that price should be pretty happy. If I buy at today's price, how happy might I be 52 weeks from now?
Divide Q2 earnings times four into market capitalization and you get a current P/E ratio of 25, which is pretty cheap for a rapidly growing company. You can use non-GAAP earnings to make the ratio look better, but I don't like to do that unless there is a very compelling reason. The company's guidance is to non-GAAP EPS for all 2007 of $2.65 per share. Use that and P/E is 24.7
Which is not just reasonable. It is a steal, so long as you are thinking long term. So what is happening here? Earnings are growing faster than revenue, which is growing fast. This is often true once a biotech company has sales of a blockbuster well underway. Earlier in the curve research is the main expense. If a company is lucky enough to get a drug approved, at first marketing eats up most of the profits. Also usually companies try for a narrow scope for initial FDA approval. If that is accomplished they can often expand the scope of the label, but that takes more clinical trials and so more R&D dollars.
And what about the Biogen Idec pipeline? Wow, they have a very strong pipeline (See BIIB pipeline page). Lots of Phase I and II stuff. Cancer drugs, neurology drugs, immune system disorders, and an area where they have no present drugs, cardio. While a significant portion of drugs fail to get FDA approval, Biogen has a good track record. It looks likely that something or another will succeed from their present pipeline.
So in the 2008 to 2010 period the continued revenue growth from currently approved indications plus likely expansion of the Tysabri label should certainly justify investing in BIIB at today's price.
Downside risks are the usual for drug companies at this stage: macroeconomic; decisions by governments or insurers not to pay; and unexpected side effects that scare away patients or force the drug off the market. Plus competition from new or existing drugs made by other companies. Not to be discounted, but I see no clear danger on the horizon. That is why we diversify portfolios, right? No matter how good your analysis is, you can be wrong on a given stock because of unexpected future events.
So I like both Gilead and Biogen Idec. The rule for my portfolio is I can only buy one right now. Which do I buy (and this exercise is not yet over; I have more companies to look at)?
Using Q2 to run a P/E ratio, Gilead is the cheaper stock (P/E = 22) than Biogen's (P/E = 25), but not by much. Biogen has a more diverse pipeline, and its drugs are for more diverse indications. But Gilead's year-over-year revenue growth rate is much higher at 52% than BIIB's at 17%.
I think Gilead is a riskier bet than Biogen, but not a lot riskier, and it is a lot less risky than two stocks I own, ANSV and DNDN. But because it is both cheaper and growing at a faster rate, I am picking Gilead (GILD), from the two candidates.
Again, this is an exercise for a specific portfolio. It may not be right for your portfolio. Also, I have a lot more looking to do before I make my final decision. I have plenty of other work on my plate right now, so the process could take weeks.
And the decision is for specific stock prices. Even if GILD wins out, I'll be checking the its price, and BIIB's, before I buy. And BIIB will stay on my short list for when I have some more cash for investing.
Biogen is now a well-established company with healthy revenues ($773 in Q2 2007, up 8% sequentially and up 17% from year-earlier) and net income (GAAP $186 million, up 41% sequentially and up from a loss of $171 million year-earlier). Avonex for multiple sclerosis revenues were $462 million. Another blockbuster drug is Rituxan, which is sold by Genentech. Its revenues from that venture were $230 million in the quarter. Tysabri is a newer drug with $48 million in revenues in the quarter. Fumaderm showed its first revenues at $5 million, and BIIB garnered another $23 million from royalties.
Research and development costs are significant at $218 million as numerous clinical studies are underway to increase the scope of the Tysabri label. A setback was Europe disallowing Tysabri for Crone's Disease, which Biogen plans to appeal.
So aside from possible future growth in Avonex, Rituxan, and Tysabri sales, and its pipeline of possible new drugs, how does today's price look? Biogen Idec stock ended today at $65.42; the company has a market capitalization of $18.75 billion. The 52 week low for the stock is $42.51, so anyone who bought at that price should be pretty happy. If I buy at today's price, how happy might I be 52 weeks from now?
Divide Q2 earnings times four into market capitalization and you get a current P/E ratio of 25, which is pretty cheap for a rapidly growing company. You can use non-GAAP earnings to make the ratio look better, but I don't like to do that unless there is a very compelling reason. The company's guidance is to non-GAAP EPS for all 2007 of $2.65 per share. Use that and P/E is 24.7
Which is not just reasonable. It is a steal, so long as you are thinking long term. So what is happening here? Earnings are growing faster than revenue, which is growing fast. This is often true once a biotech company has sales of a blockbuster well underway. Earlier in the curve research is the main expense. If a company is lucky enough to get a drug approved, at first marketing eats up most of the profits. Also usually companies try for a narrow scope for initial FDA approval. If that is accomplished they can often expand the scope of the label, but that takes more clinical trials and so more R&D dollars.
And what about the Biogen Idec pipeline? Wow, they have a very strong pipeline (See BIIB pipeline page). Lots of Phase I and II stuff. Cancer drugs, neurology drugs, immune system disorders, and an area where they have no present drugs, cardio. While a significant portion of drugs fail to get FDA approval, Biogen has a good track record. It looks likely that something or another will succeed from their present pipeline.
So in the 2008 to 2010 period the continued revenue growth from currently approved indications plus likely expansion of the Tysabri label should certainly justify investing in BIIB at today's price.
Downside risks are the usual for drug companies at this stage: macroeconomic; decisions by governments or insurers not to pay; and unexpected side effects that scare away patients or force the drug off the market. Plus competition from new or existing drugs made by other companies. Not to be discounted, but I see no clear danger on the horizon. That is why we diversify portfolios, right? No matter how good your analysis is, you can be wrong on a given stock because of unexpected future events.
So I like both Gilead and Biogen Idec. The rule for my portfolio is I can only buy one right now. Which do I buy (and this exercise is not yet over; I have more companies to look at)?
Using Q2 to run a P/E ratio, Gilead is the cheaper stock (P/E = 22) than Biogen's (P/E = 25), but not by much. Biogen has a more diverse pipeline, and its drugs are for more diverse indications. But Gilead's year-over-year revenue growth rate is much higher at 52% than BIIB's at 17%.
I think Gilead is a riskier bet than Biogen, but not a lot riskier, and it is a lot less risky than two stocks I own, ANSV and DNDN. But because it is both cheaper and growing at a faster rate, I am picking Gilead (GILD), from the two candidates.
Again, this is an exercise for a specific portfolio. It may not be right for your portfolio. Also, I have a lot more looking to do before I make my final decision. I have plenty of other work on my plate right now, so the process could take weeks.
And the decision is for specific stock prices. Even if GILD wins out, I'll be checking the its price, and BIIB's, before I buy. And BIIB will stay on my short list for when I have some more cash for investing.
Monday, May 7, 2007
Biogen Idec (BIIB) and Tysabri
Biogen Idec (BIIB) is a successful biotechnology company. I do not own any of the stock, but I have been following it closely for a couple of years now. There are a lot of lessons to be learned from this company. Its web site is www.biogenidec.com.
Biogen Idec's Q1 results were reported on May 2, and of course they had an analysts' conference (which anyone can listen to). My summary of this analyst conference is a good place to start deepening your knowledge if you think you might be interested in this company. For quick stats on companies I have my online broker, but I often find the NASDAQ site, www.nasdaq.com, to be quicker and easier to use.
Biogen reported $716 million in revenue for the quarter. That was up 16% from year earlier but only 1% sequentially, so asking if and why the stall in rapid growth took place should be your basic question. After all, NASDAQ gives Biogen a P/E ratio of 70 at today's price. That is fine if there is rapid profit growth, but a dizzying height from which to fall if profits flatten out. GAAP net income was up only 7% from year earlier, so expenses faster more than revenues.
So why the go-go PE ratio? The simplest answer is the BIIB is a biotechnology stock. The price is only a bit about past performance; it is mostly about future expectations.
So what does Biogen Idec peddle, such that its investors expect a rosy future? It sells three blockbuster drugs, Avonex (Q1 revenues $449 million), Rituxan (Q1 revenues $207 million), and Tysabri, with Q1 revenues of $30 million. It is important to note that global Tysabri sales were actually $48 million; Biogen Idec is in a partnership with Elan for this drug and only recognizes its own share as revenues.
Rituxan is used to treat non-Hodgkins B-cell lymphoma (cancer). Both Avonex and Tysabri are used to treat multiple sclerosis (MS). But in the strange (to laymen) world of the FDA, drug approvals are often very specific. Avonex is approved for both relapsing forms and monosymptomatic MS. Tysabri is approved as a monotherapy for relapsing forms.
So if you are going to invest in Biogen you might want to know the basics about Multiple Sclerosis. Good places to get basic information include the Wikipedia article on MS and the NINDS site. In the Wiki article the section on treatment mentions both Avonex and Tysabri, and a term that was much used at the analyst conference: PML, or progressive multifocal leukoencephalopathy.
Prior to the introduction of Tysabri, the viral disease PML was seen almost exclusively in immune deficiency patients, including AIDS patients.
The balancing act here is that MS is an auto-immune disease; keeping the immune system at bay can result in it not being able to do its normal job with infections. Tysabri now carries a warning that it may cause PML, which has slowed adoption. Biogen management believes that as physicians and patients understand the benefits of Tysabri and the risk of PML they will continue to adopt Tysabri. Patients apparently find Tysabri to be very beneficial.
So the slowdown in Biogen's growth can be attributed to the PML scare. But what about the future?
BIIB has a truly extensive pipeline of drug candidates. They have invested heavily in research, including clinical trials. While drug candidates more often than not bomb out because of safety issues or inability to prove effectiveness, in the case of Biogen they are highly likely to have some winners in the mix.
If you are an individual investor and are interested in biotechnology you can gain a considerable advantage by doing careful research. There are two basic strategies you can try. One is to wait until a small biotech company has its first FDA approval, then jump in. That results in substantial risk reduction, but it often means paying a high price and still having substantial risk. You can also bet on pipeline drugs that have not been approved. In that case keep in mind that if you look at the full spectrum from preclinical trials to final FDA approval, success is quite rare. Phase II trial results are usually the minimum data you need to be able to start accurately weighing risks against potential rewards.
Biogen Idec's Q1 results were reported on May 2, and of course they had an analysts' conference (which anyone can listen to). My summary of this analyst conference is a good place to start deepening your knowledge if you think you might be interested in this company. For quick stats on companies I have my online broker, but I often find the NASDAQ site, www.nasdaq.com, to be quicker and easier to use.
Biogen reported $716 million in revenue for the quarter. That was up 16% from year earlier but only 1% sequentially, so asking if and why the stall in rapid growth took place should be your basic question. After all, NASDAQ gives Biogen a P/E ratio of 70 at today's price. That is fine if there is rapid profit growth, but a dizzying height from which to fall if profits flatten out. GAAP net income was up only 7% from year earlier, so expenses faster more than revenues.
So why the go-go PE ratio? The simplest answer is the BIIB is a biotechnology stock. The price is only a bit about past performance; it is mostly about future expectations.
So what does Biogen Idec peddle, such that its investors expect a rosy future? It sells three blockbuster drugs, Avonex (Q1 revenues $449 million), Rituxan (Q1 revenues $207 million), and Tysabri, with Q1 revenues of $30 million. It is important to note that global Tysabri sales were actually $48 million; Biogen Idec is in a partnership with Elan for this drug and only recognizes its own share as revenues.
Rituxan is used to treat non-Hodgkins B-cell lymphoma (cancer). Both Avonex and Tysabri are used to treat multiple sclerosis (MS). But in the strange (to laymen) world of the FDA, drug approvals are often very specific. Avonex is approved for both relapsing forms and monosymptomatic MS. Tysabri is approved as a monotherapy for relapsing forms.
So if you are going to invest in Biogen you might want to know the basics about Multiple Sclerosis. Good places to get basic information include the Wikipedia article on MS and the NINDS site. In the Wiki article the section on treatment mentions both Avonex and Tysabri, and a term that was much used at the analyst conference: PML, or progressive multifocal leukoencephalopathy.
Prior to the introduction of Tysabri, the viral disease PML was seen almost exclusively in immune deficiency patients, including AIDS patients.
The balancing act here is that MS is an auto-immune disease; keeping the immune system at bay can result in it not being able to do its normal job with infections. Tysabri now carries a warning that it may cause PML, which has slowed adoption. Biogen management believes that as physicians and patients understand the benefits of Tysabri and the risk of PML they will continue to adopt Tysabri. Patients apparently find Tysabri to be very beneficial.
So the slowdown in Biogen's growth can be attributed to the PML scare. But what about the future?
BIIB has a truly extensive pipeline of drug candidates. They have invested heavily in research, including clinical trials. While drug candidates more often than not bomb out because of safety issues or inability to prove effectiveness, in the case of Biogen they are highly likely to have some winners in the mix.
If you are an individual investor and are interested in biotechnology you can gain a considerable advantage by doing careful research. There are two basic strategies you can try. One is to wait until a small biotech company has its first FDA approval, then jump in. That results in substantial risk reduction, but it often means paying a high price and still having substantial risk. You can also bet on pipeline drugs that have not been approved. In that case keep in mind that if you look at the full spectrum from preclinical trials to final FDA approval, success is quite rare. Phase II trial results are usually the minimum data you need to be able to start accurately weighing risks against potential rewards.
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