Biogen Idec finished 2013 on a high note, with its highly
touted oral multiple sclerosis drug Tecfidera producing nearly
$400 million in sales during the fourth quarter.
The company was on pace to generate more than $1 billion in
its first year on the market.
Tecfidera's performance helpedBiogen (
) deliver a record $1.97 billion in overall Q4 revenue.
That was up 39% from the prior year -- the biotech's biggest
quarterly gain in years -- and slightly ahead of estimates.
Earnings for the quarter also enjoyed their biggest gain in
years, rising 39% to $2.34 a share and beating expectations by 6
That's the good news. On the downside, Biogen guided 2014
profit below analyst expectations -- perhaps due to higher
research and development costs -- though the company did guide
revenue above most estimates.
While the mixed forecast has fostered caution, there are
plenty of reasons to be bullish on Biogen.
For one thing, Tecfidera should continue to bolster the
company's top line, with sales expected to advance further in the
U.S., says Karen Anderson, analyst at Morningstar. Additional
sales should come from a rollout in Europe this year, starting in
Sales of other top Biogen drugs are slowing, as is typical for
maturing treatments, but should produce strong numbers through
much of 2014. Sales of MS therapy Avonex, Biogen's biggest seller
last year, were flat in the fourth quarter at $751 million, but
still beat expectations for a modest decline.
Biogen has multiple revenue drivers and should significantly
boost its top and bottom lines this year. But there are questions
about the pace of growth.
Anderson will keep a close watch for pricing pressure on older
MS drugs if insurers push generic versions. She also wants to see
a clearer picture on Biogen's midstage pipeline -- drugs that
could drive expansion in coming years.
Midstage pipeline drugs are important because some of the new
drugs Biogen is rolling out this year could produce only a minor
bump to overall sales. "We're not particularly bullish on these
(new) products," Andersen said.
Biogen plans to launch a pair of drugs for hemophilia and an
MS drug this year. But the market for hemophilia treatments is
already crowded, and the new MS offering is essentially a
longer-lasting version of an older class of drugs.
None of those new offerings is expected to perform on the
level of Tecfidera, which was approved for sale last March. As
Cross Current Research noted in a recent report, the three drugs
slated to launch this year "may not have a 'wow' effect on the
While growth in 2014 might not live up to last year's -- when
annual earnings climbed 37% -- it's not like Biogen has hit a
wall. Analysts polled by Thomson Reuters still expect full-year
EPS to rise 27% this year and 23% in 2015.
Meanwhile, investors, after pulling back some earlier this
year, drove Biogen's stock up 11% in February. Shares touched a
record high of 353.47 on Feb. 24.
"It's just a good performer," said Mike Matousek, a trader at
U.S. Global Investors Inc., which holds Biogen shares in its
Biotech remains an appealing play, with a strong field of
performers that includes the two biggest players --Gilead
) andAmgen (
) -- as well asActavis (
),Alexion Pharmaceuticals (
),Celgene (CELG) andPerrigo (PRGO).
Pipeline Equals Growth
The state of any biotech's pipeline is evolving, notes
Matousek said. Biogen continuously has new offerings in the
works, and its history suggests another success story will bubble
up eventually. "You keep filling the pipeline and you keep your
growth going," he said.
Biogen's R&D expense is expected to be 20% to 22% of total
revenue this year, the company said in a press release. That
includes more than $200 million earmarked for potential new
business development deals.
During the fourth quarter, Biogen's non-GAAP R&D expense
totaled $421 million, or 21% of revenue. Biogen says the added
investment shows the company is committed to future development
and long-term growth.
"(There) is a real focus that we have on maturing the pipeline
-- trying to get to the next stage of growth that we can," Chief
Financial Officer Paul Clancy said at an RBC Capital Markets
conference in late February.
The intent, Clancy added, is to fuel "a sustainable growth
Several drugs in development could become strong earnings
drivers in coming years.
One of them is a therapy for spinal muscular atrophy affecting
infants and children, analyst Anderson says. Another is designed
to help repair the coating on nerves and possibly help reverse
"There's multibillion-dollar potential if it works," Andersen
Meanwhile, some analysts think Biogen is being conservative
with its earnings outlook for this year. They point out that the
company in recent years has outperformed its own bottom-line
"Historically, Biogen has been able to beat initial guidance
by 7% in the top line and 12% in the bottom line," analyst
Geoffrey Porges of Sanford C. Bernstein noted in a report.
Biogen executives sound confident enough about the company's
growth prospects. On a fourth-quarter conference call with
analysts, CEO George Scangos said the successful launch of
Tecfidera is indicative of the company's overall performance: "We
believe that Tecfidera's broad and rapid uptake is a testament to
its clinical profile, as well as excellent execution by our