Positive earnings estimate revisions, a strong second quarter
and an upbeat guidance for 2012 helped
Biogen Idec, Inc.
) hit its 52-week high on September 20, 2012. Moreover, this Zacks
#1 Rank (Strong Buy) biotechnology company has delivered positive
earnings surprises in six of the last eight quarters with an
average beat of 5.6%.
The stock's momentum should continue, given the strong performance
of key products Avonex and Tysabri, the potential approval and
launch of pipeline candidate BG-12 and positive pipeline updates.
Solid Second Quarter Results
On July 24, Biogen reported second quarter earnings per share of
$1.82, 16.7% above the Zacks Consensus Estimate of $1.56 and 34.8%
above the year-ago earnings of $1.35. Higher revenues and a lower
share count contributed to the increase in earnings.
Second quarter 2012 revenues increased 17.6% year over year to $1.4
billion, well above the Zacks Consensus Estimate of $1.3 billion.
The multiple sclerosis product Avonex was a major contributor to
the increase in revenues. The introduction of Avonex Pen and the
AVOSTARTGRIP titration dosing regimen has increased interest in the
Guidance Raised on Strong Results
Following the release of strong second quarter results, Biogen
raised its earnings guidance for 2012. The company now expects to
earn more than $6.20 per share. Previously, it had expected
earnings to exceed $6.15.
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.
Moreover, a decision on the regulatory status of Biogen's oral
multiple sclerosis candidate, BG-12, should be out in the coming
Upward Trend in Earnings Estimates
With the increase in guidance and the impressive second quarter
results, earnings estimates for Biogen have moved up over the last
60 days. The Zacks Consensus Estimate for 2012 rose 4.7% to $6.44
per share, implying year-over-year growth of 10.3%. For 2013, the
Zacks Consensus Estimate moved up 3.4% to $7.27 per share over the
same time frame, reflecting year-over-year growth of 12.9%.
Earnings should be driven by the strong performance of Avonex and
Tysabri. Longer-term growth should be driven by BG-12, which is
currently under regulatory review. Biogen is looking to launch
BG-12 in early 2013, provided it gains Food and Drug Administration
Biogen is currently trading at a forward price-to-earnings (P/E) of
24.9x, a 28.4% premium to the peer group average of 19.4x. The
company is trading at a premium on a price-to-book (P/B) basis as
well. Biogen's P/B multiple of 5.96 represents a 23.1% premium to
its peer group average of 4.84. The premium valuation is justified
given the company's track record and its impressive pipeline.
Moreover, the long-term expected earnings growth of 14.1% looks
A Look at the Chart
Biogen's shares have gained 11.9% since the announcement of solid
second quarter results and the upbeat guidance. The chart below
shows that the stock has been trading above its 200-day moving
average and the S&P 500 consistently. Apart from a few
pullbacks, the stock has been trading above its 50-day moving
average as well.
Biogen is currently above its 50 and 200-day moving averages of
$147.00 and $130.40, respectively. Volume is quite strong,
averaging roughly 765K daily.
Based in Weston, Massachusetts, Biogen is one of the world's
largest biotechnology companies. The company, which has a market
cap of $36.64 billion, focuses mainly on neurology, immunology and
hemophilia. Multiple sclerosis products such as Avonex and Tysabri
currently drive the top line. Other marketed products include
Fumaderm (treatment of severe psoriasis) and Fampyra (improvement
of walking in multiple sclerosis patients). The company also
generates significant royalties from partnering agreements with
other pharmaceutical and biotech companies. The company has
collaborations with companies like Roche Holding (
) for Rituxan, Elan Corporation (
) for Tysabri, Acorda Therapeutics, Inc. (
) for Fampyra, Biovitrum for factor VIII and IX and Abbott Labs (
) for daclizumab.
Founded in 1985, Biogen has several candidates in its pipeline,
including BG-12 (multiple sclerosis), daclizumab (multiple
sclerosis), Factor VIII (hemophilia A) and Factor IX (hemophilia B)
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