A Smart Buy On MS And Hemophilia Treatments?

Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Biogen Idec (NASDAQ: BIIB) is heavily focused on the treatment of multiple sclerosis (MS), and Avonex is one of the most prescribed treatments for relapsing forms of MS worldwide. Avonex is indicated for the treatment of patients with relapsing forms of MS to slow the accumulation of physical disability and decrease the frequency of clinical exacerbations.

The company's other drug, Tysabri, is approved in more than 65 countries. Tysabri is approved in the United States as a monotherapy for relapsing forms of MS, generally for patients who have had an inadequate response to, or are unable to tolerate, an alternative MS therapy. In the European Union, it is approved for highly active relapsing-remitting MS (RRMS) in adult patients who have failed to respond to beta interferon or have rapidly evolving, severe RRMS.

Tysabri is marketed and distributed by Biogen Idec and Elan. Rituxan is another one of Biogen's marketed drugs and is the most prescribed treatment for non-Hodgkin's lymphoma. Biogen also has Fumaderm for the treatment of severe plaque psoriasis in adults.

New product pipeline developments

Recently Biogen reported new phase 3 data for its hemophilia A drug, rFVIIIFcA. The data shows that while the results were somewhat disappointing, it is still likely be a profitable new drug and, in any case, is a mere precursor to the company's next major clinical data release for phase 3 data of dexpramipexole. Merrill Lynch cut its global market share estimates for rFVIIIFc to peak at 25% in the United States, and 21% on a global basis, down from a range of 31% to 37%. Wells Fargo (WFC) estimates that Biogen will bring in $316 million in annual revenues by 2016 from rFVIIIFc.

The pharmaceutical and biotechnology industries have spent large sums of money on the development of over 20 failed treatments for Lou Gehrig`s disease (also known as ALS), which affects as many as 30,000 people in the United States alone. With dexpramipexole, Biogen Idec has come farther than any other company in developing a treatment for this debilitating disease. In phase 2 trials, dexpramipexole, licensed from Knopp Biosciences in 2010 for $80 million, slowed the progression of ALS by 35%. Biogen Idec's phase 3 trial of dexpramipexole completed enrollment very quickly, and, if the company reports solid data, dexpramipexole should find it much easier to obtain FDA approval. It has already been granted priority review.   Dexpramipexole's phase 2I data has not shown any serious safety concerns, and it is the most promising drug for ALS patients, with clearly better efficacy than existing treatments. If approved, revenues could be in excess of $1 billion annually. 

Financials

Biogen Idec announced third quarter 2012 financial results, with revenue growth of 6% to $1.4 billion and non-GAAP diluted Earnings Per Share (EPS) growth of 19%. GAAP net income attributable to Biogen Idec for the quarter was $398 million, an increase of 13% compared to the third quarter of 2011. Non-GAAP net income attributable to Biogen Idec for the third quarter of 2012 was $455 million, an increase of 15% compared to the third quarter of 2011. As of September 30th, 2012, the company had cash, cash equivalents and marketable securities of approximately $3.3 billion.

Competition

Notable medical journal The Lancet has warned  that Sanofi's (NYSE: SNY) experimental multiple sclerosis drug Lemtrada may be too costly for patients and health insurers once it gets approved by regulators. The drug, which works by resetting a person's immune system, has shown in results from late-stage trials to be an effective treatment for MS patients who have failed to respond to alternative therapies.

rFVIIIFc in hemophilia A represents a moderate improvement over Baxter's (NYSE: BAX) Advate, which is currently dosed every 2 to 4 days (exact dosing is dependent on the case in question).  Sanofi's Rilutek, the only ALS drug on the market currently, has annual sales of only $50 million in the United States, due to its marginal efficacy in slowing the progression of ALS. Dexpramipexole has excellent prospects in the ALS market. Avonex and Tysabri are facing additional competition in the form of Novartis’ (NYSE: NVS) Gilenya which was launched in early October 2010. Another recent entrant is Sanofi’s Aubagio.

Summary

Leerink predicts that Biogen Idec could perform well in 2013, driven by strong performances by its MS and hemophilia treatments. The firm reiterates its $158 to $167 valuation and 'outperform' rating on the stock. Analysts at Zack's have a $152 price target on the stock and a neutral rating. I believe that the stock is fairly priced at the moment, and I would certainly look for some more positive developments before I would seriously consider a buy.


jordobivona has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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