Reporting for the first time as a combined entity, Biogen Idec Inc. missed consensus earnings estimates by 8 cents, posting pro forma earnings per share of 24 cents for the fourth quarter. Its full-year adjusted EPS totaled $1.22.
Biogen Idec's generally accepted accounting principles (GAAP) loss resulted from accounting related to the merger that made it the third-largest biotechnology firm in the world, based on revenue, profits and research and development spending. More specifically, the Cambridge, Mass.-based company reported a $991 million quarterly loss, equivalent to $4.03 per share, and an $875 million loss for the full year, or $4.92 per share. GAAP results include the operations of the former Biogen Inc. from Nov. 13 through Dec. 31. (See BioWorld Today, June 24, 2003.)
"Certainly, 2003 has been a transforming year for Biogen Idec," its CEO James Mullen said during a conference call, rattling off a number of recent late-stage product development milestones. "I think these past four months of operating as Biogen Idec have confirmed the promise of our new company."
But not all observers are as keen. Bill Tanner, analyst with Leerink Swann & Co. in Boston, said the merger resulted from both companies' needs to offset a potential slowdown in future revenues of their blockbusters - the flagships Avonex (interferon beta-1a) from Biogen and Rituxan (rituximab) from the former IDEC Pharmaceuticals Inc.
"We believe the combined entity largely remains beset with the same problems facing each separate company," he wrote in a research note, "and fail to see where above-industry-average EPS growth is deliverable."
Nevertheless, Biogen Idec's pro forma combined revenues for 2003 rose to about $1.9 billion, 19 percent over the comparable year-earlier period. Its three-month adjusted combined revenues increased 15 percent to $491 million.
Avonex led all revenue drivers. Biogen Idec's therapy for patients with relapsing forms of multiple sclerosis generated fourth-quarter revenue of $310 million, up 21 percent from last year's fourth quarter. Its full-year sales totaled $1.2 billion, a 13 percent increase over the prior year's sales.
"What a great year," Peter Kellogg, Biogen Idec's executive vice president of finance and chief financial officer, said during the call. "I very much doubt that any of us, internally or externally, would have predicted this strength."
The company admitted to some concern about its production of Avonex, though, noting that it had to write down $28 million worth of batches as a result.
"This is what caused the cost of sales to be higher," said Kellogg, adding that if such problems continue, it could potentially interrupt the drug's supply and would cause additional charges to the company.
"We think we understand the issue," said William Rohn, the company's chief operating officer, adding that it relates to the product's new liquid formulation sold in a prefilled syringe.
Other revenues stemmed from sales of Rituxan, a treatment for certain B-cell non-Hodgkin's lymphomas co-promoted in the U.S. with Genentech Inc. Biogen Idec received $130 million from the partnership in the fourth quarter, compared to $117 million in the year-earlier period. Its full-year take from the drug's sales was $493 million, ahead of $386 million a year ago. South San Francisco-based Genentech reported net U.S. sales of Rituxan at $369 million and about $1.4 billion in the fourth quarter and full year, respectively.
Other drug sales were more modest. Amevive (alefacept), its product for moderate to severe psoriasis, produced fourth-quarter sales of $17 million and full-year sales of $40 million. The drug, which was approved in January 2003, has failed to live up to expectations given competition in the market. Sales of the radioimmunotherapeutic agent Zevalin (ibritumomab tiuxetan) were $4.5 million in the fourth quarter, down from $5.5 in the same period last year. But for the year, Zevalin sales reached $20 million, compared to $14 million for 2002.
Going forward, Biogen Idec reaffirmed its long-term goal of achieving 15 percent compound annual revenue growth, and about 20 percent compound annual earnings per share (adjusted pro forma) growth through 2007. Its full-year EPS forecast was $1.50, given a range of plus or minus 5 cents to 7 cents.
Tanner said the company's projections largely rely on evidence of efficacy from other drugs in its pipeline, notably Antegren (natalizumab). But Biogen Idec is bullish about the future prospects of its next-generation multiple sclerosis treatment.
Last month it disclosed plans to submit a mid-year application to the FDA for Antegren's approval based on one-year Phase III results from two trials - Affirm and Sentinel. The company has acknowledged that no other marketed multiple sclerosis therapies have been approved with less than two years' worth of data, but said it is working within the framework of an agreement with the agency that it could file if one year's Affirm data demonstrated comparable efficacy to that seen in Phase II. (See BioWorld Today, Feb. 19, 2004.)
Tanner summarized data from the 213-patient monotherapy trial, which were published in January 2003 in the New England Journal of Medicine, showing that treatment with Antegren produced a significant reduction in new lesions (9.6 for placebo vs. 0.7 for Antegren) and relapses (27 patients with relapses in the placebo group vs. 13 with relapses in the Antegren group).
"Also, in order to file," he added, "the Sentinel trial must show evidence that Antegren demonstrates meaningful improvement over patients treated with Avonex alone. [Biogen Idec's] management would not elaborate on the nature of the data so we are left to speculate whether the improvement observed in the Sentinel trial is, in fact, clinically relevant, if not statistically significant."
The product is partnered with Elan Corp. plc, of Dublin, Ireland. The companies also are exploring its use in Crohn's disease and rheumatoid arthritis.
Looking ahead, Biogen Idec expects its capital expenses to range between $325 million and $400 million, with a significant portion directed to the construction of a large-scale manufacturing facility and administrative, research and development space in the San Diego area. Also in its financial report, the company said its board authorized the repurchase of up to 12 million common shares and said it has about 331 million outstanding.
"As a combined company," Kellogg said, "we'll be able to afford to deliver those [15 percent top-line and 20 percent bottom-line] results, and afford a very strong R&D pipeline."
Biogen Idec's stock (NASDAQ:BIIB) gained 64 cents to close at $58.28.