Newspaper article Sarasota Herald Tribune

Portfolio Feeling Poorly? Consider Biogen Therapy

Newspaper article Sarasota Herald Tribune

Portfolio Feeling Poorly? Consider Biogen Therapy

Article excerpt


Biogen (BIIB) is a biopharmaceutical company that discovers, develops, manufactures and markets therapies for neurological, autoimmune and blood disorders.

When I last wrote about the company about a year ago, my fiscal 2015 earnings estimate was for $14.80, with a 12-month share price projection of $343, for a 10 percent capital gain.

So how did the company do? Well, I will give you a hint. My share price estimate was way off.

Earnings for fiscal 2015 came in at $17.01, which was well ahead of my estimate. However, the shares recently closed at $314.63, well under my projection. So the question now is why.

Well, a lot has happened over the past year. Most recently, as Zacks' Research pointed out, Biogen's partner, Eisai, said their experimental treatment for early Alzheimer's disease, BACE inhibitor E2609, had received Food and Drug Administration approval to advance to phase III studies.

Biogen also announced the name of the new hemophilia-focused company that will be created by spinning off its hemophilia franchise currently marketing products like Eloctate and Alprolix. The company will be named Bioverativ and will trade under the symbol BIVV on the Nasdaq. The spin-off is scheduled to be completed early next year.

In addition, the company's recently announced second-quarter numbers were slightly ahead of expectations. On a Generally Accepted Accounting Principles basis, which is all that really counts, revenues were $2.89 billion, up 6 percent, from $2.73 billion, from the month before and up 12 percent, from $2.59 billion, in the year- earlier quarter.

Net income was $1.05 billion, up 8 percent for the month from $971 million and up 13 percent from $927 million in the year- earlier quarter, resulting in earnings per share of $4.79, up 9 percent sequentially from $4.43 and up 22 percent from $3.93 year- earlier.

These were positive developments and should improve both earnings and the share price going forward. But we need to dig a little deeper.

Probably the largest minus for the quarter was the announcement that Biogen has agreed to pay royalties to an undisclosed third party. The royalties will be on Avonex production, most likely on some production process that Biogen uses to manufacture Avonex.

The royalties, which will be a mid-single-digit percent of sales, are estimated to be $50 million for the remainder of the year, with a bigger impact coming in 2017. …

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