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Biogen Beats on All Fronts

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Biogen Idec (BIIB) reported second quarter earnings per share of $1.82, well above the Zacks Consensus Estimate of $1.56 and 34.8% above the year-ago earnings of $1.35. Higher revenues boosted earnings. A lower share count also contributed to the increase in earnings per share.

Second quarter 2012 revenues increased 17.6% to $1.4 billion. Revenues were also well above the Zacks Consensus Estimate of $1.3 billion. Avonex was a major contributor to the increase in revenues.

Including one-time items, second quarter 2012 earnings increased 36.4% to $1.61 per share.

The Quarter in Detail

Second quarter Tysabri revenues remained flat at $280 million. Tysabri revenues, however, declined 2.1% on a sequential basis. Global in-market net revenues of Tysabri, which is partnered with Elan Corp. (ELN), came in at $395 million (up 2%) in the second quarter of 2012. Revenues, however, were down 1% on a sequential basis. Tysabri global revenues consisted of US revenues of $211 million and ROW (Rest of the World) revenues of $184 million.

Biogen estimates that as of the end of June 2012, about 69,100 patients were on commercial and clinical Tysabri therapy worldwide. This represents an increase from the 66,600 patients reported by the company in the first quarter of 2012.

Tysabri’s label has been updated so as to include anti-JC virus antibody status as one potential factor that could help stratify the risk of progressive multifocal leukoencephalopathy (PML) occurring in patients treated with Tysabri. Biogen is now in a position to approach neurologists and provide the MS community with more confidence when considering treatment options.

Meanwhile, we were pleased to see a significant improvement in the performance of Avonex, Biogen’s lead MS product. Avonex posted second quarter revenues of $762 million (up 16%). On a sequential basis, Avonex revenues were up 15.1%.

Biogen has been working on driving Avonex revenues. The company launched Avonex Pen in the US earlier this year and said that performance was strong in the second quarter of 2012. Avonex Pen helps improve convenient administration. The rollout of Avonex Pen in the EU and US should increase patient and physician interest in Avonex.

We note that both Avonex and Tysabri are facing additional competition in the form of Novartis’ (NVS) Gilenya which was launched in early Oct 2010.

However, Biogen is looking to bring BG-12, its oral MS candidate, to market in early 2013. The company reported impressive data on the candidate, which is currently under US and EU review. BG-12 could become a leader in the oral MS market once launched.

Rituxan revenues increased 31% to $285 million in the second quarter. Biogen and partner Roche (RHHBY) have been working on driving Rituxan growth by expanding the label for additional indications.

Earnings Outlook Up

Biogen raised its earnings guidance for 2012. The company expects earnings to exceed $6.20 per share on mid-single digit revenue growth. The company was previously expecting earnings to exceed $6.15 per share. The Zacks Consensus Estimate for 2012 is currently $6.15 per share.

While the company expects to spend 24% to 25% of total revenue on R&D, SG&A spend is expected to be about 22% to 23% of total revenue. As the company prepares for the potential launch of BG-12 in early 2013, Biogen is investing in product positioning, promotional planning, scientific outreach, patient support services and supply chain.

Biogen has some important data read-outs lined up in the coming months. These include data on the company’s hemophilia candidates, dexpramipexole for amyotrophic lateral sclerosis or Lou Gehrig’s disease and PEGylated interferon beta-1a for multiple sclerosis.

The company also completed its $500 million share repurchase program.

Neutral on Biogen

We currently have a Neutral recommendation on Biogen. The stock carries a Zacks #2 Rank (short-term ‘Buy’ rating). The approval of BG-12, potentially later this year/early next year, would be a major boost for the stock.


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