Biogen's Measured Growth

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Yesterday, biopharmaceutical firm Biogen Idec (Nasdaq: BIIB) announced another quarter of solid but unspectacular financial results.

Revenue for the quarter was up 17% as sales of the two compounds that comprise the vast majority of Biogen's revenue, Avonex and Rituxan, both experienced sales gains. Due to higher clinical trial and other costs, though, adjusted earnings were up only 7% year over year to $0.59 a share for the quarter.

Speaking of the clinic, Biogen continued to make strides in solidifying itself as one of the top three companies working to treat multiple sclerosis. It's doing this by advancing one of its intriguing potential MS compounds, BG-12, into later-stage clinical trial testing this quarter and reporting positive phase 2 results for daclizumab, which is partnered with PDL BioPharma (Nasdaq: PDLI). Both compounds have the potential to become blockbusters and to be as important to Biogen as its other MS therapies, Avonex and Tysabri (the latter is partnered with Elan (NYSE: ELN)). Though BG-12 and daclizumab may have some promise in extending Biogen's reach in the MS market, it will be years before either of them could launch.

Shares of Biogen are trading at a fair 18 times 2007 earnings guidance. This isn't particularly expensive if you consider multiple sclerosis therapy Tysabri's future to be bright, and if Biogen and Rituxan partner Genentech (NYSE: DNA) can continue growing sales of Rituxan and Avonex in the mid-teens percentages for the long term.

Sure, Biogen is past the explosive growth phase of its operations. But drug companies with top compounds that steadily grow sales almost always outperform the market as long as R&D and SG&A costs can be kept under control. Biogen appears to have the revenue portion of this equation under control, and if it can do a better job of controlling the expenditure side of things then long-term investors who buy shares at this level won't go wrong.

Biogen is a Stock Advisor recommendation, and PDL BioPharma is a  Rule Breakers pick.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.