Biogen's Brisk Business

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Following a rumor-filled and busy couple of weeks, Stock Advisor pick Biogen Idec (Nasdaq: BIIB) announced its third-quarter financial results yesterday.

Revenue for the quarter was up 12% versus last year, thanks to growth in sales of Tysabri and autoimmune-disease drug Rituxan. Non-GAAP net income gained 6%, if you exclude a one-time $50 million upfront collaboration payment from Biogen's bottom line. Non-GAAP earnings per share were $0.69 excluding this one-time payment, $0.09 higher than last year.

Sales of Biogen's and Elan's (NYSE: ELN) multiple sclerosis (MS) drug Tysabri were $93 million for the quarter. At an annualized price of about $28,000 for a course of therapy, this puts the Tysabri sales run rate at $448 million, considering the 16,000 patients taking the drug commercially by the end of Q3.

Biogen has guided for 100,000 patients to be using Tysabri by the end of 2010. If it can hit this number, and the average wholesale cost inches up to $30,000 worldwide, it and partner Elan would be taking in a combined $3 billion from the drug.

Considering that sales of Avonex are stagnating (up 2% in the quarter), and that Rituxan is becoming a mature product, Tysabri is Biogen's biggest near-term revenue growth driver. Its success will ultimately determine whether Biogen can meet its year-end 2010 target of 20% compounded annual non-GAAP EPS growth.

Earlier this month, Biogen got the bad news that the FDA would extend its review of the potential Tysabri label expansion into Crohn's disease. The FDA now expects to make a decision on the review by Jan. 13.

On the conference call, Biogen Executive Vice President Bob Hamm stated that the company's 100,000-patient goal for Tysabri only included a modest contribution from Crohn's disease users because the drug would compete with Johnson & Johnson's (NYSE: JNJ) Remicade and Abbott Labs' (NYSE: ABT) Humira.

Even though the extended review likely won't hurt Tysabri's user growth, the target of 100,000 patients within a little more than three years seems out of reach. The duo would have to engage a large number of the 450,000 MS patients that Biogen estimates exist.

More than 135,000 of those patients are on Biogen's Avonex, which has been on the market for more than 11 years. It is leading in sales in MS treatments. With four blockbuster MS treatments and possibly more on the way, this doesn't leave a lot of space or time for Tysabri to grow to its 100,000 target by stealing market share from competitors.

During its conference call, Hamm said that 35% of U.S. Tysabri users were new MS patients not currently on a treatment therapy. If it wants to reach its Tysabri forecast, it will have to continue expanding the MS market. Whether Biogen can hit this target or not, Tysabri is its main near-term revenue growth driver, so investors should be giving that drug a lot of attention.