5 Things Biogen Idec Inc's Management Wants You to Know

Biogen Idec (NASDAQ: BIIB  ) held a conference call to go along with the release of second quarter earnings. Here are five things that management said on the call about Biogen Idec's ongoing prospects (quotes courtesy of S&P Capital IQ).

George Scangos
Source: Biogen Idec

1."Our core multiple sclerosis franchise performed remarkably well, and we continue to see an increasing number of patients using our therapies." -- George Scangos, Biogen Idec's CEO

When Biogen Idec launched its oral multiple sclerosis drug Tecfidera, the worry was that it would steal patients away from Biogen Idec's Avonex and Tysabri, which both have to be injected. Unless the profits on Tecfidera are substantially higher than Avonex and Tysabri, switching among Biogen Idec products isn't going to have much of an effect on earnings.

Fortunately the number of patients that Tecfidera is stealing away from other multiple sclerosis drugs is enough to keep the total number of multiple sclerosis patients Biogen Idec is treating on the rise. Biogen Idec recently launched Tecfidera in Germany and the launch appears to be on pace to capture the same market share as the U.S. despite the delayed start.

Douglas Williams
Source: Biogen Idec

2. "We're working expeditiously to file an application for regulatory approval of daclizumab." -- Douglas Williams, Biogen Idec's executive vice president of research and development

In June, Biogen Idec and partner AbbVie (NYSE: ABBV  ) said their multiple sclerosis drug daclizumab beat Rebif, which is sold by EMD Serono and Pfizer (NYSE: PFE  ) . Daclizumab produced a 45% reduction in annualized relapse rate compared to Rebif.

Not only did it beat the competition, but daclizumab only has to be injected once a month, making it an attractive option even compared to daily pills. It seems we'll get to see if Biogen Idec can repeat its ability to not cannibalize sales of its current drugs.

Paul Clancy
Source: Biogen Idec

3. "During the quarter, as part of our share stabilization plan, we repurchased 1.2 million shares for a total of approximately $340 million." -- Paul Clancy, Biogen Idec's Chief Financial Officer

That's about $283 per share for those that don't have a calculator. Not bad considering shares are more than 20% higher at this point. It'll be interesting to see if Biogen Idec continues to repurchase shares at the increased price. Shares are now trading at about 26 times expected non-GAAP earnings for this year. That's not exactly cheap, but Biogen Idec clearly has growth potential; revenue is expected to grow about 40% year over year, and while there's a one-time benefit in there that might make it hard to duplicate the same growth in 2015, Biogen Idec is clearly still a growth story.

4. "We ended the quarter with approximately $2.6 billion in cash and marketable securities which approximately two-thirds within the U.S." -- Clancy

That's a healthy pile of cash that Biogen Idec could use to repurchase shares, especially if they go on sale, or acquire drugs through licensing or purchasing entire companies. Given its growth potential, I don't think Biogen Idec is ready for a dividend quite yet.

And kudos to Clancy for disclosing how much of the cash is stored overseas and can't be brought back into the U.S. without paying additional tax on it. Storing cash overseas limits what Biogen Idec can do with it. The best use would be an acquisition or licensing deal with a foreign company.

Speaking of foreign acquisitions, we end with a comment on the potential for Biogen Idec to do an inversion to lower the company's tax rate...

5. "A major, major consideration for us, which is probably more acute than others, is for our long-term shareholders, it would result in a meaningful capital gains ... we have shareholders that have been in this stock for a very long period of time, and with the capital appreciation in the stock, that's a major, major consideration that we think about." -- Clancy

Tax inversions are often set up as mergers or reverse acquisitions with the smaller foreign company buying the larger U.S. company, which can be a taxable event for shareholders. For Biogen Idec's shareholders that could be a substantial tax bill; shares of the biotech are up about 60% over the last year and nearly 600% over the last five years.

Lowering taxes would benefit shareholders through higher earnings, but it may take awhile for the stock appreciation from higher earnings to make up for the capital gains bill from Uncle Sam.

It's nice to see the company taking shareholders into account as part of the decision of whether to invert.

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  • Report this Comment On September 03, 2014, at 9:50 PM, Muthu wrote:

    Please check the facts before publishing - Daclizumab did NOT beat Rebif. In fact it was never compared head to head versus Rebif in a clinical trial. The result that you are referring to is from the DECIDE trial, in which Daclizumab produced a 45% reduction in annualized relapse rate compared to Avonex (a Biogen product.)

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