Biogen Idec Inc.
(BIIB) reported first-quarter earnings per share of $1.04, a cent above the year-ago figure of $1.03 but well below the Zacks Consensus Estimate of $1.12. Excluding the impact of stock-based compensation expense, earnings came in at $1.08 per share.
Despite an increase in revenue, performance was impacted by higher expenses including a $13 million charge taken due to the recent health care reform. Revenue increased 7% to $1.1 billion, with Tysabri and Avonex being the primary growth drivers.
Revenue by Major Products
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. Tysabri global sales consisted of U.S. sales of $135 million and ROW (Rest of the World) sales of $157 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 March 2010, about 50,300 patients were on commercial and clinical Tysabri therapy worldwide. This represents an increase from the 48,800 patients reported by the company in the fourth 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 first quarter sales of $593 million (up 7%). Rituxan revenues declined 9% to $255 million. Biogen is looking to expand Rituxan’s label to revive growth. Biogen and partner, Roche (RHHBY), are currently seeking FDA approval for the use of Rituxan as a maintenance treatment for treatment-naïve patients with advanced follicular lymphoma.
Revenues from other products remained flat at $13 million. Royalties increased 8.3% to $26 million.
Share Repurchase
Biogen continued to repurchase shares during the first quarter and said that it has completed its $1 billion share repurchase program that had been announced in the fourth quarter of 2009. About 10.5 million shares were repurchased for $577.6 million.
The company exited the quarter with $2.2 billion in cash, cash equivalents and marketable securities. Biogen’s Board of Directors authorized another repurchase program in April, this time for $1.5 billion. The repurchase of shares should help boost the bottom-line.
Our Expectations
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. Biogen is conducting studies on Tysabri which should help drive long-term growth provided the results are positive.
The company is also working on building its pipeline through acquisitions and in-licensing deals, which should contribute to long-term growth. We currently have a Neutral recommendation on the stock.
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