Biogen Keeps Momentum Going With MS Drug Tecfidera

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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 ( BIIB ) 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 cents.

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.

Bright Spots

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 Germany.

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 stock."

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 portfolio.

Biotech remains an appealing play, with a strong field of performers that includes the two biggest players --Gilead Sciences ( GILD ) andAmgen ( AMGN ) -- as well asActavis ( ACT ),Alexion Pharmaceuticals ( ALXN ),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 engine."

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 MS.

"There's multibillion-dollar potential if it works," Andersen said.

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 forecasts.

"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 organization."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: BIIB , GILD , AMGN , ACT , ALXN

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