Biogen Idec Inc. turned a profit in the first quarter, though its $43 million in income was less than many would have predicted a few months ago, before Tysabri (natalizumab) was taken off the market.
Hyped as the Cambridge, Mass.-based company's next big revenue producer, the multiple sclerosis drug was linked to patient deaths stemming from progressive multifocal leukoencephalopathy (PML) only months after receiving FDA approval. That prompted Biogen Idec to voluntarily take Tysabri out of patients' hands.
But despite that missed revenue opportunity, the company said its overall business is sound.
"Even as we focus on this critical ongoing analysis," Biogen Idec CEO James Mullen said during a conference call, "it's important to emphasize that our core business remains healthy and growing, as evidenced by the underlying strength of top-line revenues."
Biogen Idec's net income, reported in accordance with generally accepted accounting principles (GAAP), translated to earnings per share of 12 cents for the quarter ended March 31. On an adjusted non-GAAP basis, its earnings per share totaled 30 cents, lower than analyst expectations of 37 cents per share.
Such earnings were boosted by a 9 percent increase in total revenues to $588 million for the first quarter, courtesy of an upsurge in sales of its lead multiple sclerosis and cancer drugs. The company posted 5 percent growth in worldwide Avonex (interferon beta-1a) sales to $374 million and 20 percent growth in co-promotion profits for Rituxan (rituximab) to $160 million.
"Our core businesses are healthy and growing," Mullen said, "generating very strong, positive cash flows for the company."
Skeptics were less bullish on the company's outlook. In forecasting future prospects at Biogen Idec for investors, analyst Jennifer Chao, at Deutsche Bank in New York, said in a research note that "risks include manufacturing/commercialization setbacks, clinical development disappointments, and disappointing Avonex and Rituxan sales." Further speaking to those two flagship products, she noted that Avonex's image could be tarnished due to an association with Tysabri while Rituxan sales proved lower than expected.
Tysabri has cast a long shadow. In pointing out that its three-month results were impacted by charges of about $36 million, or 7 cents per share, primarily related to the drug's suspension, Biogen Idec conceded that its full-year earnings and revenue growth would be significantly changed. Going forward, the company forecasts $90 million to $100 million in total Tysabri-related charges for the full year, part of an overall $140 million hit in one-time charges.
As a result, Biogen Idec declined to provide specific adjustments to its prior full-year earnings-per-share guidance until it is able to clarify Tysabri's outlook. Previously, it forecast per-share earnings to range from $1.60 to the low $1.70s.
First-quarter revenues from the drug totaled $6 million, net of estimated returns associated with its suspension. The company and its partner, Elan Corp. plc in Dublin, Ireland, are working through safety evaluations concerning its possible relation to PML, and they plan to discuss results with regulatory agencies to decide on future commercial prospects and if clinical trial dosing can continue.
With the potential blockbuster drug's future in doubt, and concurrent with Biogen Idec's earnings release, Elan posted its quarterly financial statement and revealed a net loss that grew 86 percent to $115.6 million, compared to $62.2 million a year earlier. Its revenues also dipped, falling 31 percent to $102.7 million.
But despite the change in the risk-benefit profile of Tysabri, on which so many hopes were pinned, both companies offered optimistic outlooks for the drug's future.
"I'm hopeful that Tysabri will return to the market," Mullen said, mentioning positive efficacy data reported at a variety of recent scientific meetings. "Tysabri works very well, and offers great hope to the MS community."
Doubts about the product's viability continue to linger. "We remain skeptical with respect to Tysabri's commercial potential given the very real PML concern," Chao said, adding that her firm has "no Tysabri revenue in our financial projections."
On Thursday, Biogen Idec's stock (NASDAQ:BIIB) gained 14 cents to close at $35.98. Elan's stock (NYSE:ELN) tacked on 44 cents to close at $4.69.