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