No Picking at Biogen

At a time in which all of its top drugs experienced at least double-digit percentage sales growth, there aren’t many issues to poke at with Biogen Idec’s (Nasdaq: BIIB  ) just-released second-quarter financial results.

Revenue was up 28% versus last year, and adjusted net income gained 11% in the second quarter. Biogen’s top drugs, Avonex, Rituxan, and Tysabri, all experienced strong year-over-year sales growth, either from Biogen or from its primary marketing partners (Genentech (NYSE: DNA  ) with Rituxan, and Elan (NYSE: ELN  ) with Tysabri).

 

Second-Quarter Sales

Growth vs. Last Year

Avonex

$527 million

14%

Rituxan*

$651 million

12%

Tysabri

$200 million

178%

*Just U.S. sales

Of these three most important Biogen drugs, Avonex’s sales growth is the least sustainable -- it was boosted primarily by price increases, which Biogen won’t be able to continue to do in a crowded multiple-sclerosis drug market. Tysabri is the other compound that investors should keep an eye on, since it will be the key driver of Biogen’s revenue growth over the coming years.

With $200 million in sales in the most recent quarter by Biogen and Elan, Tysabri is well on its way to becoming a blockbuster drug. It will generate more than a billion dollars in revenue to be split among Biogen and Elan next year. In its quarterly results presentation, Biogen showed that more than half of all new Tysabri patients were patients who switched from other competing therapies, like Teva’s (Nasdaq: TEVA  ) Copaxone and Pfizer’s (NYSE: PFE  ) Rebif.

 

Number of Tysabri Commercial Patients Worldwide

QOQ Patient Growth

Quarterly Tysabri Sales for Both Elan and Biogen

End of June 2008

31,200

22%

$200 million

End of March 2008

25,500

25%

$160 million

Near end of December 2007

20,400

28%

$129 million

End of September 2007

16,000

28%*

$93 million

*estimate

If current trends hold, and Biogen and Elan keep adding Tysabri patients at this current decelerating growth rate, then by my estimates, Biogen and Elan will have around 75,000 patients on the drug by the end of 2010. This is below Biogen’s forecast of 100,000 patients on Tysabri by year-end 2010.

Of course, this estimate is very sensitive to changes in Tysabri’s quarterly patient growth rates. Even if Tysabri’s wholesale cost increases only 4% a year, this would represent an annualized run rate of around $2.2 billion in Tysabri sales by the end of 2010. That amount would be split among Biogen and Elan by the time new therapies from Genzyme (Nasdaq: GENZ  ) , PDL BioPharma, and Novartis (NYSE: NVS  ) could potentially be online.

Yesterday, Biogen also raised its 2008 non-GAAP earnings per share guidance to $3.50 a share. Earlier in the month, it beat dissident investor Carl Icahn’s attempts to get his picks on Biogen’s board. None of this addresses whether shares of Biogen are undervalued at this point in time, but Biogen seems to be having its way with the competition and others going against it.

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


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