Biogen Beats & Guides Higher - Analyst Blog

Biogen Idec Inc. (BIIB) reported fourth quarter earnings per share of $1.18, beating the Zacks Consensus Estimate of $1.05. The company reported earnings of 91 cents in the year-ago period.

Performance was driven by higher revenues and lower expenses. Revenues increased 5% to $1.1 billion, with Tysabri and Avonex being the primary growth drivers.

For the full year, the company reported earnings of $4.03, well above the Zacks Consensus Estimate of $3.93 and the year-ago earnings of $3.58. Full-year revenues increased 7% to $4.4 billion.

Revenue by Major Products

Fourth quarter Tysabri revenues came in at $216 million, up 39% from the prior period. Global in-market net sales of Tysabri, which is partnered with Elan Corp. (ELN), came in at $296 million (up 37%) in the fourth quarter of 2009. Tysabri global sales increased 30% to $1.1 billion in 2009 (US - $509 million; ROW [Rest of the World] - $551 million).

Despite carrying a black-box warning for the risk of progressive multifocal leukoencephalopathy (PML) and other cautionary language, Tysabri continued to see an increase in patients. Biogen estimates that as of the end of Dec 2009, about 48,800 patients were on commercial and clinical Tysabri therapy worldwide. This represents an increase from the 46,200 patients reported by the company in the third quarter of 2009.

However, we note that the number of new patients adopting Tysabri has been declining over the past few quarters. The US Food and Drug Administration (FDA) recently announced that the Tysabri label should contain stronger language regarding the incidence of PML associated with increased use of the drug. With Tysabri being an important growth driver for Biogen, we remain concerned that an increase in the number of PML cases associated with its use could lead to a slowdown in Tysabri sales going forward.

Meanwhile, Biogen’s lead multiple sclerosis (MS) product Avonex posted fourth quarter sales of $596 million (up 5%). Full-year sales came in at $2.3 billion, up 5%. Rituxan revenues declined 3% to $1.1 billion for the year due to the expiration of royalties on sales outside the U.S. Rituxan revenues fell 15% to $257 million in the fourth quarter. Biogen is looking to expand Rituxan's label to revive growth.

Revenues from other products increased 40% to $14 million in the fourth quarter of 2009. For the full year, revenues from other products increased 10% to $54 million. While fourth quarter royalties increased 41.4% to $41 million, full-year royalties increased 6.9% to $124 million.

2010 Outlook Exceeds Expectations

Biogen Idec provided better than expected earnings guidance for 2010. The company expects to earn more than $4.55 per share on revenue growth in the mid-single digits. This is well above the current Zacks Consensus Estimate of $4.44. Biogen expects core operating expense growth in the low single digits. While R&D is expected to be 24% - 27% of total revenue, SG&A is expected to be 20% - 22% of total revenue. Biogen shares were up 1.9% following the release of fourth quarter results.

Biogen continued to repurchase shares during the fourth quarter. About 14.8 million shares of stock were repurchased at a total cost of $694 million in the reported quarter. An additional 5.4 million shares (for $289 million) were repurchased in the first quarter of 2010 as well.

Biogen has $288 million remaining under its Oct 2009 program. The company exited the year with $2.5 billion in cash, cash equivalents and marketable securities. The repurchase of shares should help boost the bottom-line.

Our Expectations

We currently have a Neutral recommendation on Biogen. Key products Avonex and Tysabri continue to contribute significantly to sales, and we expect Biogen to maintain its leading position in the multiple sclerosis market going forward. The company is also working on building its pipeline through acquisitions and in-licensing deals, which should contribute to long-term growth.

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