Biogen Idec heads into its second-quarter earnings report on
one of its best rolls in years, as the biotech continues to
benefit from heavy demand for its drugs to treat multiple
sclerosis, cancer and autoimmune diseases.
The No. 3 biotech by market cap has run off six straight
quarters of accelerated sales growth. Year-over-year earnings
have risen at least 23% five quarters in a row.
Much of the credit goes toBiogen 's (
) blockbuster oral MS drug Tecfidera, which was approved last
year. The drug produced more than $500 million in sales during
this year's first quarter -- nearly one-quarter of the total --
with the vast majority generated in the U.S.
Earlier this year Tecfidera was approved for sale in Europe, a
development that should continue to drive revenue in coming
quarters, analysts say.
"That's the drug that has to continue to perform well," Eric
Schmidt, a Cowen analyst who covers Biogen, told IBD.
Tecfidera should play a similarly big role in Biogen's Q2
results, which are due to be reported before the open on
Wednesday. Analysts polled by Thomson Reuters expect EPS of
$2.83, up 23% from the prior year. Revenue is seen rising 26% to
"The company has long done what it said it would do, and we
think heading into earnings that the financials will look good,"
During its first quarter, Biogen logged a 25% earnings rise
and 51% revenue increase -- its biggest top-line gain in
Biogen has a long history of producing high-demand drugs that
command premium prices and fuel steady profitability.
The company's annual profit has climbed every year since 1998.
According to the consensus on Wall Street, that streak is not
likely to be interrupted any time soon. Yearly earnings are
projected to surge nearly 30% this year and another 25% in 2015,
according to analysts polled by Thomson Reuters.
Over the medium term, analysts expect Biogen's top line to get
a boost from its rollout of hemophilia drugs Alprolix and
In June, Biogen said the Food and Drug Administration approved
Eloctate for the control and prevention of bleeding episodes,
surgical management and routine prophylaxis in adults and
children with hemophilia A.
Less than two weeks earlier, the FDA approved Alprolix for the
same indications in adults and children with hemophilia B.
Longer term, Biogen is developing treatments for diseases such
as Alzheimer's and spinal muscular atrophy that could provide a
further lift to its financial returns, analysts say.
Biogen did not respond to an interview request. But George
Scangos, Biogen's CEO, said at the company's annual shareholder
meeting in June that 2014 is "off to a very, very positive
He said Biogen's success depends on "scientific and medical
excellence" needed to discover and develop new drugs and bring
them to the market.
"We are very good at that part of our business," Scangos
The risk for Biogen -- or any biotech, for that matter -- is
that it might spend many years and millions of dollars on
research that fails to lead to a drug that is effective and
"It's really hard to forecast if a drug will work and get
approved," Morningstar analyst Karen Andersen said in an
Drug companies are also under pressure to contain price
increases at a time when the U.S. and other countries are trying
to curb health care inflation. That pressure poses a threat to
drug developers' profit potential, Andersen says.
Scangos acknowledged this problem during the shareholder
"We have to be good at the commercial aspects," he said.
That doesn't just mean marketing and sales, Scangos says.
"It's also how we negotiate with the payers around the world --
the insurance companies in the U.S., the governments in the rest
of the world -- so that we can maximize the value that we are
generating for our products."
Meanwhile, Biogen has spent part of 2014 dealing with a
different type of problem -- mainly, perceptions about its stock
Earlier this year, investors cheered biotech stocks. But by
the spring, Wall Street decided the group was overheated.
Several companies endured double-digit hits in a sell-off that
got underway in March and spanned several weeks. Between March 18
and May 8, Biogen's shares tumbled nearly 20%.
Since then, however, Biogen's stock price has risen about 7%
and currently trades near 303.
The company's stock hit had little to do with its fundamentals
and more to do with its stock simply getting caught in a sell-off
in the biotech market, Cowen's Schmidt says.
"There was a lot of hype" around the biotech sector early in
2014, he said, "and I think all that intangible promise has
cooled off a bit. I think we went from a glass-overflowing
situation back to more of a glass-half-full situation."
IBD's Medical-Biomed/Biotech group still lags on the lower end
of the spectrum compared to other groups. It ranks No. 116 of 197
industries tracked by IBD, although big names such asGilead
) andCelgene (
) have seen shares rally in recent months.