Maturing Pipeline Boosts Biogen Earnings

The growth is just getting started at Biogen Idec (NASDAQ: BIIB ) . OK, so it’s been ongoing for quite some time, but it certainly isn’t about to end anytime soon. The company recently launched Tecfidera for multiple sclerosis in the United States, completed three regulatory filings, is expecting three market launches in 2014, and has major trials releasing data in 2015 and 2016. Oh, yeah, and it crushed the second quarter. Was there any bad news to be found?

Financially speaking …
Biogen reported second-quarter sales of $1.7 billion, non-GAAP diluted EPS of $2.30, and non-GAAP net income of $549 million — year-over-year increases of 21%, 26%, and 25%, respectively. That’s a pretty ridiculous change in annual operating results. The stellar earnings prompted management to increase 2013 guidance for revenue growth, now expected to grow at a 22% to 23% clip, and non-GAAP diluted EPS to between $8.25 and $8.50.

There were two major catalysts boosting Biogen earnings over the past three months. First, Tysabri sales soared 38% year over year after the company acquired Elan’s rights for the drug. Global sales actually decreased by 2% compared with the year-ago period, although the company did submit a Biologics License Application in Japan last month that will create a future growth opportunity. Second, Tecfidera launched with a loud bang after being approved on March 27. Total revenue for the drug registered at an impressive $192 million for the second quarter.

Biogen’s quarter even beat out that of its oft-compared peer Celgene (NASDAQ: CELG ) , which grew at least 17% in revenue, EPS, and income. I think the argument could be made that Biogen had better quarter.

Metric

Biogen

Celgene

Second0quarter revenue

$1.7 billion

$1.56 billion

Net income

$490.7 million

$478.1 million

Shareholders’ equity growth in 2013

13.5%

(5%)

Sources: Biogen and Celgene press releases. ;

I still think it’s difficult to look past Celgene’s impressive pipeline potential, which is probably the reason the company took the lead in the race for the largest market cap against Biogen. Nonetheless, both remain incredible growth stories for biotech investors. Just be careful about paying lofty premiums for that growth in the coming quarters.

Reasons for pessimism?
I may be digging a little bit here — I admit it’s tough to come up with negatives — but Friday’s announcement invalidating several Teva (NYSE: TEVA ) patents for multiple sclerosis drug Copaxone could shake up the market quite a bit. Could the emergence of two cheap generics from Momenta and Mylan in the first half of next year take some steam out of Tecfidera’s rise? I can’t see it being good news for either Teva or Biogen, but I’m not sure it’s a death sentence, either.

Foolish bottom line
Biogen remains one of the most promising names in biotech — and growth stocks, for that matter. A solid second quarter and rising full-year guidance for 2013 only support that thesis further. Tecfidera will continue to lift revenue for the next several quarters — or longer — but investors shouldn’t underestimate the risk that generic multiple sclerosis drugs pose. All in all, the enthusiasm for growth remains intact until larger risks reveal themselves. ;

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Maturing Pipeline Boosts Biogen Earnings

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