Zacks_Analysts' Blog : Neutral on Biogen - Analyst Blog

We recently reiterated our Neutral recommendation on Biogen Idec (BIIB). Biogen is the market leader in therapies for the treatment of multiple sclerosis (MS). We believe the company will continue to retain a leading position in the MS market.

Biogen’s largest product, Avonex, posted sales of $2,518.4 million, up 8.4%, in 2010. We expect Avonex to continue contributing significantly to the top-line thanks to price increases, focused marketing effort, expansion into new markets and positive clinical data.

Meanwhile, Tysabri, the company’s second MS product, continues to see an increase in patients despite carrying a “black box” warning for the risk of progressive multifocal leukoencephalopathy (PML) and other cautionary language. Tysabri posted $1.2 billion in sales in 2010. Tysabri’s launch in new markets like India, Brazil, Argentina, the Middle East and Southeast Asia among others should help drive growth. Tysabri sales should reach $1.5 billion in 2011.

We are also pleased with Biogen’s efforts to consolidate its position in the MS market. The most promising candidate in the company’s MS pipeline in BG-12, which could become a leader in the oral MS market once launched. With impressive phase III data in hand, Biogen expects to file for approval in the first half of 2012.

We believe BG-12 could become a leader in the oral MS market once launched. Biogen is also studying BG-12 as a combination therapy. Other interesting candidates in the MS pipeline daclizumab, which is being developed in collaboration with Abbott Labs (ABT), and PEGylated interferon. Biogen’s pipeline also has candidates for other ailments like amyotrophic lateral sclerosis (ALS), or Lou Gehrig’s disease, and hemophilia.

While we are impressed with Biogen’s progress with its MS franchise, our biggest concern remains the competitive threat posed by Novartis’ (NVS) Gilenya that was launched in early October 2010. Gilenya is competing primarily with Avonex and Tysabri for a share of the MS market. We remain concerned that being the first oral treatment to have gained US approval for the treatment of MS, Gilenya could take share from Biogen’s products.

Also, we expect some cannibalization of Avonex sales once BG-12 is launched. Longer-term, Biogen’s MS products could face additional competition as companies like Sanofi (SNY) are working on developing MS treatments. The entry of additional competitors could make it challenging for Biogen to maintain its position in the MS market.