Why Investors Should Love Biogen's Earnings Miss

Biogen's shares slumbered through trading after the company's earnings release, but Tecfidera's impressive growth makes the future impressively bright for this biotech giant.

Apr 24, 2014 at 6:30PM

Big biotech Biogen Idec (NASDAQ:BIIB) has weathered the industry's storm in a rocky 2014. The stock's gained more than 9% despite the biotech sector's fall brought on by nervous investors concerned about the market's rally, and Biogen has plenty of room for optimism. The company's emerged as a dominant player in the growing, lucrative multiple sclerosis space, and it's turned patient investors into rich ones in the five years of the current bull market.

Yet financial performance drives companies, and all eyes have turned to Biogen's first-quarter earnings for the year as the company rallies behind newly launched MS drug Tecfidera. The biotech giant released its results on Wednesday before the opening bell, but Wall Street shrugged its shoulders as this stock fell through most of the trading day. Can investors count on this stock through 2014 in the wake of the first quarter?

Why did the stock fall?
Analysts had expected big things of Biogen going into Wednesday's report. On average, Wall Street projected that the company would manage around 30% year-over-year per-share earnings, with revenue gaining an even stronger amount by 41% over last year's result. With the launch of Tecfidera, that steep hill wasn't such a daunting climb for this biotech star.


Source: Wikimedia Commons.

Count Wall Street unimpressed despite the company pulling in more than $2 billion in sales, a 51% year-over-year gain that topped analyst expectations. Biogen's earnings did miss the mark, thanks to drug collaboration expenses, but savvy long-term investors shouldn't focus on the one black mark on this company's otherwise standout quarter. Biogen leadership certainly didn't ignore recent gains in boosting the company's revenue growth and earnings outlook for the year.

For Biogen's future, however, it's all about the new drugs hitting the market and set for launch. Its older MS drugs, Tysabri and Avonex, remain the cash cows they are as a stable foundation for investors, but Tecfidera may help pave the way for Biogen's future. The company's newest blockbuster hopeful certainly didn't disappoint, reeling in more than $500 million to top analyst expectations. Tecfidera's already thriving in its short life after hauling in nearly $400 million last quarter, and it's already outselling established leader Tysabri. Previous peak sales estimates that expected the drug to make around $4 billion by 2018 indicate plenty of potential sales moving forward.

Breaking new ground
True, Tecfidera will have to deal with tough competition in this space. Most notably, Novartis(NYSE:NVS) Gilenya reigns as the heavyweight in the oral MS market right now, as the drug recorded more than $1.9 billion last year, according to Novartis' most recent full-year report. That was enough to mark 61% year-over-year growth, and Novartis won't allow Biogen the freedom to dominate this space without a fight.

Still, Biogen's optimistic about Tecfidera's prospects this year, and this is a market with plenty of room for multiple leaders to thrive. The New York Times has reported that the MS drug market was worth $14 billion annually as of last year. While the majority of that originated in the U.S., Tecfidera's barely begun generating sales overseas yet, as it recorded international revenue of just $46 million for this quarter. If Biogen can push its new star globally in the next few years, investors could be set for a surprising windfall.

Tecfidera isn't all Biogen has going for it in the near future. The company's embraced diversification, looking outside of the MS market with its recently approved hemophilia B therapy Alprolix. While Alprolix won't launch until next month and analysts only see around $400 million in peak sales for this new drug, it's an important step for Biogen as it looks to broaden its product portfolio across other growing medical markets. The competition's tough here as well, as Baxter (NYSE:BAX) will square off against Biogen with its own hemophilia B drug, the 2013-approved Rixubis, and Biogen's also pushing against Baxter in the hemophilia A market with its yet-to-be-approved therapy Eloctate. Biogen hopes to launch Eloctate later this year, and analysts see up to $700 million in annual sales from this therapy, giving investors a key new market to keep an eye on.

Long-term looking
Overall, Tecfidera and Biogen's up-and-coming hemophilia drugs make it an exciting time for this biotech star and its investors. While tried-and-true Tysabri and Avonex continue to churn out cash for Biogen, it's time to look to the future. What a bright future it could be if Tecfidera keeps up with strong growth in the coming years and Biogen pushes successfully beyond its MS market excellence. Wall Street might be down about Biogen's profit miss today, but smart investors invest for the long term -- and that's exactly where this stock looks the best.

Don't miss the next wave of health-care innovation
As great biotech investors know, the path to riches in health care is paved with innovation. The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion-dollar industry." And the technology behind it is poised to set off one of the most remarkable health-care revolutions in decades. The Motley Fool's exclusive research presentation dives into this technology's true potential and its ability to make life-changing medical solutions never thought possible. To learn how you can invest in this unbelievable new technology, click here now to see our free report.

Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Baxter International. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers