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
Showing posts with label Tysabri. Show all posts
Showing posts with label Tysabri. Show all posts
Tuesday, April 30, 2013
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/
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/
Tuesday, March 15, 2011
Biogen Idec PML Test Approved in Europe, Changing Tysabri Outlook
For all the publicity about multiple sclerosis drug Tysabri, investors tend to forget that the real breadwinner so far for Biogen Idec continues to be Avonex, also for multiple sclerosis (MS). Avonex revenues in Q4 2010 were $654 million; Tysabri revenues were $242 million.
Tysabri is the more effective drug, but it has been held back by the risk of PML, progressive multifocal leukoencephalopathy. This is in turn caused by JCV, a virus often quietly, apparently harmlessly residing in human brains. MS is an immune disorder; its treatments involve dialing down the immune system. In about 1 in 1000 patients, JCV wakes up, and instead of being taken care of by the immune system, causes serious damage or even death.
As a result, despite its effectiveness many patients and doctors have only used Tysabri as a last resort.
Now that score should change. The new test will let physicians know which MS patients have JCV and which don't. Presumably, those that don't have JCV could take Tysabri without fear. It is believed that about one-half of potential patients in the U.S. and Europe have JCV, although it is more common in cultures with poor sewage systems.
Those who have JCV can still take Tysabri, but would be closely monitored. So far PML incidents have occurred in patients taking Tysabri for a period longer than 1 year.
New MS therapies are also being developed or marketed, notably Gilenya by Novartis, which is the first oral treatment for the disease, but which was not as effective as Tysabri in clinical trials.
Meanwhile, Biogen is narrowing the scope of its development program, eliminating oncology and cardiovascular candidates to focus on immunology. This should reduce costs in the short run.
Since the quarter ended Fampyra for mobility for MS patients was rejected by the European Medicines Agency (EMA), but Biogen is appealing the decision. Fampyra is approved in the United States. The FDA also approved Rituxan as a maintenance treatment for advanced follicular lymphoma. In the quarter Rituxan generated $258 million.
Because Tysabri can now be "risk stratified," Biogen has stopped enrolling patients in the long-term Surpass trial, which is designed to show off its superior efficacy.
Going forward, Biogen has a lot riding on the questions of whether doctors and patients can put the PML scare behind them, and on whether they will prefer an easy to administer oral drug to the more effective, but harder to administer Tysabri.
See also http://www.biogenidec.com/
Tysabri is the more effective drug, but it has been held back by the risk of PML, progressive multifocal leukoencephalopathy. This is in turn caused by JCV, a virus often quietly, apparently harmlessly residing in human brains. MS is an immune disorder; its treatments involve dialing down the immune system. In about 1 in 1000 patients, JCV wakes up, and instead of being taken care of by the immune system, causes serious damage or even death.
As a result, despite its effectiveness many patients and doctors have only used Tysabri as a last resort.
Now that score should change. The new test will let physicians know which MS patients have JCV and which don't. Presumably, those that don't have JCV could take Tysabri without fear. It is believed that about one-half of potential patients in the U.S. and Europe have JCV, although it is more common in cultures with poor sewage systems.
Those who have JCV can still take Tysabri, but would be closely monitored. So far PML incidents have occurred in patients taking Tysabri for a period longer than 1 year.
New MS therapies are also being developed or marketed, notably Gilenya by Novartis, which is the first oral treatment for the disease, but which was not as effective as Tysabri in clinical trials.
Meanwhile, Biogen is narrowing the scope of its development program, eliminating oncology and cardiovascular candidates to focus on immunology. This should reduce costs in the short run.
Since the quarter ended Fampyra for mobility for MS patients was rejected by the European Medicines Agency (EMA), but Biogen is appealing the decision. Fampyra is approved in the United States. The FDA also approved Rituxan as a maintenance treatment for advanced follicular lymphoma. In the quarter Rituxan generated $258 million.
Because Tysabri can now be "risk stratified," Biogen has stopped enrolling patients in the long-term Surpass trial, which is designed to show off its superior efficacy.
Going forward, Biogen has a lot riding on the questions of whether doctors and patients can put the PML scare behind them, and on whether they will prefer an easy to administer oral drug to the more effective, but harder to administer Tysabri.
See also http://www.biogenidec.com/
Wednesday, October 27, 2010
Biogen Idec (BIIB) Deals with JCV
Biogen Idec (BIIB) reported Q3 numbers and held its analyst conference call Tuesday, October 26, 2010. Despite some headwinds revenues rose 5% from Q3 2009. A lot of the value in Biogen lies in the future, in the big, fat Biogen therapy pipeline.
Biogen Idec is my favorite type of stock: a growth and value proposition, with just enough danger to keep me on my toes and keep the risk-adverse (apparently just about everyone right now) away. I own Biogen stock.
Right now Biogen has three big money makers: Avonex, Tysabri, and Rituxan. Avonex and Tysabri are both for multiple sclerosis (MS). In total they generated $847 million in revenue in the quarter. They face twin dangers: the JC virus (JCV), which causes PML, and newer therapies, most notably Gilenya. Can Biogen continue to grow profits while waiting for its future therapies to bear fruit? If so, it is vastly undervalued, because it has a trailing P/E ratio today of about 13. Seen as a growth stock it should climb not just because of climbing earnings per share (EPS), but because the P/E ratio should climb to closer to 25 to 30.
A cure for JCV is not on the horizon, but for its MS patients, what Biogen needs is to be able to screen for the presense of the virus. Tysabri sales have been impacted by JCV, which is usually harmless unless the immune system is compromised. Since MS is a disease in which the immune system attacks the nervous system, cures for it involve suppressing the immune system. In (very approximately) about 1 in 1000 patients receiving Tysabri, JCV gets out of control, which can lead to PML and death. After withdrawing Tysabri from the market when this was originally discovered, it is now back on the market and patients must be monitored for symptoms of PML.
Trials have now showed that about half of MS patients do not harbor JCV, so they should be able to take Tysabri with minimal danger. As to the half that do harbor JCV, it would appear that they now have a 2 in 1000 chance of developing PML. Given how effective Tysabri is for MS, the likely scenario is that after the FDA approves Biogen's screening test for JCV, they will lose some JCV positive patients, but gain a lot more JCV negative patients. That could happen in 2011, but timing is up to the FDA and its equivalent international bodies.
The other threat is oral MS therapies, which are far more convenient for patients and doctors than the current infused therapies like Avonex and Tysabri. The first approved is Gilenya. Biogen claims data shows Tysabri is more effective than Gilenya, so the new drug will go mostly to patients with early, mild MS. But you never no what will happen in the marketplace. Biogen management did not say so, but sadly in the marketplace physicians can charge more for infusions than they can for writing prescriptions for oral therapies.
What I think is going to happen is that Gilenya will cut into the MS pie, but Avonex and Tysabri will continue to be widely prescribed. Patients often rotate therapies, changing them as their disease progresses. Also note that Avonex and Tysabri are still being introduced in many nations, so international sales increases should more than make up for any erosion in the U.S. market.
So for the next few years Biogen's cash from operations, $420 million in Q3 alone, is reasonably assured. Not every therapy in the Biogen pipeline will win FDA approval or become a blockbuster. But so many therapies are in the pipeline that already have good Phase I or Phase II data, I am reasonably confident that in 5 years Biogen will be a much larger company. Risks there are, as I have indicated; don't ignore them, spread them out.
See also:
Q3 2010 Biogen Idec analyst call summary including questions from analysts
Biogen Idec Hemophilia Therapies
Gilenya, Biogen Idec, and MS
Keep diversified!
Biogen Idec is my favorite type of stock: a growth and value proposition, with just enough danger to keep me on my toes and keep the risk-adverse (apparently just about everyone right now) away. I own Biogen stock.
Right now Biogen has three big money makers: Avonex, Tysabri, and Rituxan. Avonex and Tysabri are both for multiple sclerosis (MS). In total they generated $847 million in revenue in the quarter. They face twin dangers: the JC virus (JCV), which causes PML, and newer therapies, most notably Gilenya. Can Biogen continue to grow profits while waiting for its future therapies to bear fruit? If so, it is vastly undervalued, because it has a trailing P/E ratio today of about 13. Seen as a growth stock it should climb not just because of climbing earnings per share (EPS), but because the P/E ratio should climb to closer to 25 to 30.
A cure for JCV is not on the horizon, but for its MS patients, what Biogen needs is to be able to screen for the presense of the virus. Tysabri sales have been impacted by JCV, which is usually harmless unless the immune system is compromised. Since MS is a disease in which the immune system attacks the nervous system, cures for it involve suppressing the immune system. In (very approximately) about 1 in 1000 patients receiving Tysabri, JCV gets out of control, which can lead to PML and death. After withdrawing Tysabri from the market when this was originally discovered, it is now back on the market and patients must be monitored for symptoms of PML.
Trials have now showed that about half of MS patients do not harbor JCV, so they should be able to take Tysabri with minimal danger. As to the half that do harbor JCV, it would appear that they now have a 2 in 1000 chance of developing PML. Given how effective Tysabri is for MS, the likely scenario is that after the FDA approves Biogen's screening test for JCV, they will lose some JCV positive patients, but gain a lot more JCV negative patients. That could happen in 2011, but timing is up to the FDA and its equivalent international bodies.
The other threat is oral MS therapies, which are far more convenient for patients and doctors than the current infused therapies like Avonex and Tysabri. The first approved is Gilenya. Biogen claims data shows Tysabri is more effective than Gilenya, so the new drug will go mostly to patients with early, mild MS. But you never no what will happen in the marketplace. Biogen management did not say so, but sadly in the marketplace physicians can charge more for infusions than they can for writing prescriptions for oral therapies.
What I think is going to happen is that Gilenya will cut into the MS pie, but Avonex and Tysabri will continue to be widely prescribed. Patients often rotate therapies, changing them as their disease progresses. Also note that Avonex and Tysabri are still being introduced in many nations, so international sales increases should more than make up for any erosion in the U.S. market.
So for the next few years Biogen's cash from operations, $420 million in Q3 alone, is reasonably assured. Not every therapy in the Biogen pipeline will win FDA approval or become a blockbuster. But so many therapies are in the pipeline that already have good Phase I or Phase II data, I am reasonably confident that in 5 years Biogen will be a much larger company. Risks there are, as I have indicated; don't ignore them, spread them out.
See also:
Q3 2010 Biogen Idec analyst call summary including questions from analysts
Biogen Idec Hemophilia Therapies
Gilenya, Biogen Idec, and MS
Keep diversified!
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
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/
Thursday, April 23, 2009
Tysabri Leads Biogen Idec Revenue Growth
Tysabri revenues have been an issue for investors ever since the Multiple Sclerosis (MS) therapy was held to contribute to patient deaths from PML (Progressive Multifocal Leukoencephalopathy). Biogen Idec (BIIB) had to take Tysabri off the market, then reintroduce it with warnings and with PML detection awareness. Other than the PML issue, Biogen Idec has promoted Tysabri as a sort of wonder drug for MS, and apparently plenty of doctors and patients agree the benefits are worth the risks. In the first quarter of 2009 Tysabri revenue was $165 million, up 44% from the year-earlier quarter.
Overall revenues in Q1 were $1.03 billion, down a tad from $1.07 billion in Q4 but up 10% from year-earlier. Not bad during a recession. Biogen's main MS therapy, Avonex, showed a 4% y/y revenue gain, to $536 million for the quarter. Rituxan, reported as unconsolidated joint business revenue, contributed $279 million.
For more details on the quarter, see my Biogen Idec Analyst Conference Summary for Q1 2009.
Consider the entire field of therapies for autoimmune diseases such as MS. Therapies will suppress the immune response. To some extent this will result in overall immune system response, and that will open the patient up to potential infections. It is very difficult to take all the risk out of something as complicated as the human body.
Tysabri actually seems to repair (or allow the body to repair) damage caused by MS, and can be discontinued if an infection occurs. As long as PML cases remain rare, and given the grim outcome of MS progression, it makes sense for patients to want to try Tysabri.
With Tysabri continuing to grow revenue, and with a strong development pipeline, I expect Biogen to continue to grow revenues and profits. There is the usual downside danger from competition and further adverse reactions to Biogen therapies, but I believe they are relatively minimal, and accounted for in the stock price.
I own some Biogen stock, as well as other biotech stocks.
More:
www.biogenidec.com
Openicon Biogen Idec page with links to past analyst conference summaries
My Biotech Investing help page
Overall revenues in Q1 were $1.03 billion, down a tad from $1.07 billion in Q4 but up 10% from year-earlier. Not bad during a recession. Biogen's main MS therapy, Avonex, showed a 4% y/y revenue gain, to $536 million for the quarter. Rituxan, reported as unconsolidated joint business revenue, contributed $279 million.
For more details on the quarter, see my Biogen Idec Analyst Conference Summary for Q1 2009.
Consider the entire field of therapies for autoimmune diseases such as MS. Therapies will suppress the immune response. To some extent this will result in overall immune system response, and that will open the patient up to potential infections. It is very difficult to take all the risk out of something as complicated as the human body.
Tysabri actually seems to repair (or allow the body to repair) damage caused by MS, and can be discontinued if an infection occurs. As long as PML cases remain rare, and given the grim outcome of MS progression, it makes sense for patients to want to try Tysabri.
With Tysabri continuing to grow revenue, and with a strong development pipeline, I expect Biogen to continue to grow revenues and profits. There is the usual downside danger from competition and further adverse reactions to Biogen therapies, but I believe they are relatively minimal, and accounted for in the stock price.
I own some Biogen stock, as well as other biotech stocks.
More:
www.biogenidec.com
Openicon Biogen Idec page with links to past analyst conference summaries
My Biotech Investing help page
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
Monday, September 1, 2008
Biogen Idec: Will it Recover?
Biogen Idec has a remarkably low PE (price to earnings) ratio of 15.9 (per Nasdaq BIIB summary page, which uses non-GAAP numbers) for a biotechnology stock. The reason is simple: it was announced on July 31, 2008, that two patients taking Tysabri for Multiple Sclerosis (MS) had developed PML (progressive multifocal leukoencephalopathy). In 2005 Tysabri had been taken off the market after it was associated with 3 previous cases of PML. It was allowed back on the market in 2006 with a warning about PML in its label.
Tysabri accounted for $147 million out of $993 million total Q2 2008 revenues for Biogen Idec [See my summary of Biogen Idec Q2 2008 analyst conference]. In addition, it had the fastest growing revenues, up 210% from year earlier.
In a market where there are thousands of undervalued stocks to choose from, it is easy to understand a rapid exit from a stock based on any bad news, especially if the extent of the damage is unknown. But did that leave the stock fairly priced?
What is the downside from the new PML cases? First, more PML cases were expected when Tysabri was re-introducted to the market. No PML at all would have been the surprise. There is a warning about PML on the Tysabri label, and a monitoring program in place to catch PML early if it occurs. Which is exactly what happened. However, if there are a lot more PML cases, this still could cause the FDA to take the drug off the market.
Why has the FDA even allowed Tysabri to continue? Because it is remarkably effective in treating MS compared to other available treatments. Many patients and doctors feel this increased effectiveness makes it worth the risk of PML.
So far, the risk of PML, while undeniable, is minimal. There are currently about 30,000 Tysabri patients, and 2 got PML, and both have been improving since they were diagnosed (PML can cause death).
Biogen continues to work with the FDA to make the drug label clear. Without a doubt some doctors and patients will decide the benefits are not worth the known risks. However, that is against a backdrop of rapid switching to Tysabri from less effective therapies.
With Rituxan for NHL (non-Hodgkin Lymphoma) and Avonex for MS both producing more revenue for Biogen than Tysabri does, and with the stock price so low, I think the risk for investors is not particularly great. Avonex revenue grew 14% y/y, and Rituxan grew 21%. While the removal of Tysabri from the market cannot be entirely discounted, that is a risk that has to be weighed against the likelihood that Tysabri will remain on the market, and that Biogen's revenues and profits will continue to grow rapidly with or without Tysabri.
Take into account BIIB's pipeline of drugs in clinical trials, and you have a company that is likely to be much more valuable a few years from now than it is today.
I own Biogen Idec stock and, as a long-term investor, see no reason to sell it. Like all biotech stocks, there is risk involved in this investment.
So keep diversified!
Tysabri accounted for $147 million out of $993 million total Q2 2008 revenues for Biogen Idec [See my summary of Biogen Idec Q2 2008 analyst conference]. In addition, it had the fastest growing revenues, up 210% from year earlier.
In a market where there are thousands of undervalued stocks to choose from, it is easy to understand a rapid exit from a stock based on any bad news, especially if the extent of the damage is unknown. But did that leave the stock fairly priced?
What is the downside from the new PML cases? First, more PML cases were expected when Tysabri was re-introducted to the market. No PML at all would have been the surprise. There is a warning about PML on the Tysabri label, and a monitoring program in place to catch PML early if it occurs. Which is exactly what happened. However, if there are a lot more PML cases, this still could cause the FDA to take the drug off the market.
Why has the FDA even allowed Tysabri to continue? Because it is remarkably effective in treating MS compared to other available treatments. Many patients and doctors feel this increased effectiveness makes it worth the risk of PML.
So far, the risk of PML, while undeniable, is minimal. There are currently about 30,000 Tysabri patients, and 2 got PML, and both have been improving since they were diagnosed (PML can cause death).
Biogen continues to work with the FDA to make the drug label clear. Without a doubt some doctors and patients will decide the benefits are not worth the known risks. However, that is against a backdrop of rapid switching to Tysabri from less effective therapies.
With Rituxan for NHL (non-Hodgkin Lymphoma) and Avonex for MS both producing more revenue for Biogen than Tysabri does, and with the stock price so low, I think the risk for investors is not particularly great. Avonex revenue grew 14% y/y, and Rituxan grew 21%. While the removal of Tysabri from the market cannot be entirely discounted, that is a risk that has to be weighed against the likelihood that Tysabri will remain on the market, and that Biogen's revenues and profits will continue to grow rapidly with or without Tysabri.
Take into account BIIB's pipeline of drugs in clinical trials, and you have a company that is likely to be much more valuable a few years from now than it is today.
I own Biogen Idec stock and, as a long-term investor, see no reason to sell it. Like all biotech stocks, there is risk involved in this investment.
So keep diversified!
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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