Biogen Idec (BIIB) reported second-quarter earnings per share of $1.36, 2 cents below the Zacks Consensus Estimate of $1.38. Earnings increased 7.1% from the year-ago period. Excluding the impact of stock-based compensation expense, second quarter 2011 earnings increased 4% from the year-ago period.
Second quarter revenues remained flat at $1.20 billion – revenues were impacted by $50 million due to an accrual related to an intermediate decision in Genentech, Inc.’s ongoing arbitration with Hoechst GmbH. Revenues, however, were above the Zacks Consensus Estimate of $1.18 billion.
The Quarter in Detail
Second quarter Tysabri revenues came in at $281 million, up 28% from the prior-year period. Global in-market net sales of Tysabri, which is partnered with Elan Corp. (ELN), came in at $389 million (up 31%) in the second quarter of 2011. Tysabri global sales consisted of US sales of $183 million and ROW (Rest of the World) sales of $206 million.
Biogen estimates that as of the end of June 2011, about 61,500 patients were on commercial and clinical Tysabri therapy worldwide. This represents an increase from the 58,400 patients reported by the company in the first quarter of 2011.
With Tysabri being an important growth driver for Biogen, we remain concerned that an increase in the number of progressive multifocal leukoencephalopathy (PML) cases associated with its use could lead to a slowdown in Tysabri sales going forward.
Biogen is looking to update Tysabri’s label so as to include anti-JC Virus antibody status as one potential factor that could help stratify the risk of PML occurring in patients treated with Tysabri. On June 22, Biogen and Elan said that the European Commission granted approval for the inclusion of the additional risk in the Tysabri label in the EU.
Meanwhile, Biogen’s lead multiple sclerosis (MS) product Avonex posted second quarter sales of $659 million (up 5%). Biogen has been working on driving Avonex sales and raised the number of sales reps in the field to increase market share.
Meanwhile, Avonex Pen gained approval in the EU for use in patients with relapsing multiple sclerosis and patients with a single demyelinating event. The availability of Avonex Pen should help improve convenient administration.
We note that both Avonex and Tysabri are facing additional competition in the form of Novartis’ (NVS) Gilenya, which was launched in early Oct 2010. Results from a study comparing Gilenya with Avonex showed that Gilenya reduced relapse rates by 52% at one year compared with Avonex. Being an oral therapy, Gilenya could find quick acceptance as currently available therapies require injection or infusion.
Rituxan revenues declined 29% to $216 million in the second quarter. Biogen’s share of Rituxan revenues was impacted by $50 million due to an accrual related to an intermediate decision in Genentech, Inc.’s ongoing arbitration with Hoechst GmbH.
Biogen and partner Roche (RHHBY) have been working on driving Rituxan growth by expanding the label for additional indications. In January 2011, Rituxan gained approval from the US Food and Drug Administration (FDA) as a maintenance treatment for patients with advanced follicular lymphoma who responded to initial treatment with Rituxan and chemotherapy.
Rituxan also gained approval as a combination treatment (with corticosteroids) for adults with Wegener’s granulomatosis and microscopic polyangiitis.
Revenues from other products increased 36% to $16 million. Royalties, however, declined 5% to $29 million.
Share Repurchase
During the second quarter, Biogen repurchased 2.2 million shares for about $191 million. The lower share count helped boost the bottom line.
Outlook for 2011
Biogen expects 2011 earnings to exceed $5.70 with revenues expected to increase in the low to mid-single digit range. The current Zacks Consensus Estimate is already well above the company’s guidance at $5.85.
Neutral on Biogen
We currently have a Neutral recommendation on Biogen, which carries a Zacks #3 Rank (short-term “Hold” rating). Key products, Avonex and Tysabri, should continue contributing significantly to sales. Meanwhile, the company’s restructuring initiative should help drive the bottom-line. We are also pleased with the company’s intention to streamline its pipeline development and focus on candidates that represent higher potential.
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