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Earnings Miss for Biogen

Zacks Equity Research

Biogen Idec (BIIB) reported fourth quarter earnings per share of $1.40, missing the Zacks Consensus Estimate of $1.46 and 6.7% below the year-ago earnings. Fourth quarter 2012 revenues increased 6.9% to $1.418 billion. Revenues were well above the Zacks Consensus Estimate of $1.383 billion. Despite posting higher revenues, higher expenses led to the year-over-year decline in earnings.

Moreover, results were adversely affected by a correction in the accounting for taxes on capitalized interest at Biogen’s Denmark facility. The correction increased fourth quarter 2012 tax expense by $29 million and reduced earnings by 12 cents.

Including one-time items, fourth quarter 2012 earnings increased 1% to $1.23 per share.

Full-year earnings increased 11.1% to $6.50 per share, 4 cents below the Zacks Consensus Estimate. Meanwhile, revenues increased 9% to $5.516 billion, above the Zacks Consensus Estimate of $5.481 billion.

The Quarter in Detail

Fourth quarter Tysabri revenues increased 10% to $295 million from the year-ago period. Tysabri revenues increased 7.3% on a sequential basis. Global in-market net revenues of Tysabri, which is partnered with Elan Corp. (ELN), came in at $433 million (up 14%) in the fourth quarter of 2012.

Tysabri global revenues consisted of US revenues of $243 million and ROW (Rest of the World) revenues of $190 million. The sequential improvement in Tysabri revenues is encouraging.

Meanwhile, Avonex, Biogen’s lead multiple sclerosis (MS) product, posted fourth quarter revenues of $753 million (up 7%). On a sequential basis, Avonex revenues were up 2.3%.

Biogen has been working on driving Avonex revenues. The company launched Avonex Pen in the US last year. Avonex Pen helps improve convenient administration. The rollout of Avonex Pen in the EU and US should increase patient and physician interest in Avonex.

Rituxan revenues increased 9% to $281 million in the fourth quarter.

Biogen provided guidance for 2013. The company expects earnings in the range of $7.15 - $7.25 per share on 10% revenue growth. While the company expects to spend 22% to 23% of total revenues on R&D, SG&A spend is expected to be about 24% to 26% of total revenues.

Biogen currently carries a Zacks Rank #3 (Hold). 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. Another recent entrant is Sanofi’s (SNY) Aubagio.

Biogen is looking to bring Tecfidera (BG-12), its oral MS candidate, to market this year. The company reported impressive data on the candidate, which is currently under US and EU review. A response from the FDA should be out by March.

Tecfidera could become a leader in the oral MS market once launched. The company is seeking approval in Australia, Canada and Switzerland as well.

While Novartis is also a Zacks Rank #3 stock, both Elan and Sanofi are Zacks Rank #2 (Buy) stocks.

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