West Coast Editor

As some adopt a wait-and-see attitude to the company's new multiple sclerosis drug Tysabri (natalizumab, formerly Antegren), Biogen Idec Inc. reported satisfying fourth-quarter 2004 earnings and offered guidance for the coming year near the top end of consensus estimates.

"They were only off a few cents" from expected earnings per share for the fourth quarter, noted Winton Gibbons, analyst with William Blair & Co. in Chicago, who is neutral on the stock.

Other analysts greeted the earnings more favorably, with Bear Stearns and CIBC World Markets, both of New York, upgrading the stock to "outperform" status. CIBC raised its target price from $71 to $77. Bear Stearns' target price is $79.

Biogen Idec's shares (NASDAQ:BIIB) closed Tuesday at $66.23, up 8 cents.

"The headline for us is, they said when they did the merger [of Biogen Inc. and IDEC Pharmaceuticals Inc., in 2003], they were going to give us 20 percent growth per year," Gibbons said. "They got 18 percent growth in 2004, and they're talking about low-double digit next year. So in 2006 and 2007, they better get 25 percent."

He said the company was "kind of digging a hole for itself" with the promise, and "could have given us 20 percent in 2004. They decided to invest [more] in sales and marketing, which makes sense but they're not giving us the payoff they promised."

Revenues for 2004 surpassed $2.2 billion, as compared to $679 million in 2003, thanks mainly to Avonex (interferon beta-1a) for relapsed MS, sales of which jumped 21 percent to $1.4 billion, and co-promotion profits from Rituxan (rituximab) for B-cell non-Hodgkin's lymphoma, which increased by 25 percent to $615 million. The Rituxan partner is South San Francisco-based Genentech Inc.

Fourth-quarter revenues were $586 million, compared to $300 million for the period last year, with adjusted pro-forma non-GAAP totaling $491 million, an increase of 19 percent, also driven mainly by Avonex sales, which rose 19 percent to $370 million. Rituxan profits rose 31 percent to $170 million.

Fourth-quarter non-GAAP earnings per share added up to 34 cents, compared to a consensus of 36 cents, mainly because of operating expenses that reached $422 million. Biogen Idec provided non-GAAP EPS guidance for 2005 of $1.60 to $1.70 or slightly higher.

Whither Tysabri, the MS therapy approved by the FDA in November?

The alpha-4 antagonist hit the market in time for just more than a month of sales, and added $3.1 million in revenue for the year. Its near-term future remains unclear, with the likes of Christopher Raymond, analyst with Robert W. Baird & Co. in Chicago, predicting slower-than-expected physician uptake - though Michelle Grady, senior analyst with Decision Resources in Waltham, Mass., said the intravenous compound partnered with Dublin, Ireland-based Elan Corp. plc likely is to become a "mainstay" in MS therapy. (See BioWorld Today, Nov. 29, 2004.)

Biogen Idec's management apparently feels the same, predicting that by the end of 2007, the company's piece of Tysabri revenue will total as much as Avonex now. Raymond wrote in a research note that Tysabri, as it makes inroads, could "transform the treatment of MS" even if, by shifting patients away from beta interferons, it takes share away from Avonex - a problem that could be eased by positioning Tysabri as a second-line therapy.

"I'm not sure why you'd want to do that, given that Avonex has two other interferon competitors," Gibbons told BioWorld Today. "Most, if not all, patients become refractory over time, so they'll get them eventually. And eventually' is not even a long time - a year or two or three. They're trying to get Tysabri to be the first therapy, and maybe they'll be successful," he added.

"The way we view the market is one of interferons plus Copaxone and now Tysabri," he said. "We think it breaks down into thirds. Copaxone [glatiramer acetate, from Teva Pharmaceutical Industries Ltd., of Jerusalem] shows a little bit of growth, but the interferon market may decline by as much as half - which is not good for Avonex, but that will be more than made up for by Tysabri."

The other beta interferons are Rebif, from Serono SA, of Geneva, and Betaseron, sold by Montville. N.J.-based Berlex Laboratories Inc. Two-year data on Tysabri and figures on neutralizing antibodies are expected soon, which should lend more clarity to the drug's future.

A wild card on the MS horizon that could endanger Biogen Idec's high hopes for Tysabri is East Hanover, N.J.-based Novartis Pharmaceuticals Inc.'s FTY720, an oral, once-daily drug. A suppressor of the immune system that works by reducing the number of lymphocytes in the blood by redirecting them to the lymph nodes, FTY-720 has been tested in Phase II trials with 281 patients and is entering Phase III trials in MS this year.

"From a mechanistic perspective, metabolism and dosing, I would say it's possible the Novartis product ends up in combination [with any or all of the existing drugs]," Gibbons said.

Meanwhile, Biogen Idec, the world's third-largest biotech firm (behind Thousand Oaks, Calif.-based Amgen Inc. and Genentech) chalked up $10 million in revenues from Amevive (alefacept) for psoriasis, compared to adjusted pro-forma non-GAAP revenues of $17 million for the same period last year. For the full year, the numbers are $43 million in 2004 and $40 million in 2003.

Revenues from Zevalin (ibritumomab tiuxetan) for relapsed or refractory low-grade, follicular or transformed B-cell non-Hodgkin's lymphoma were $8 million in the fourth quarter ($5 million for the period in 2003) and $23 million for the full year ($20 million in 2003).

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