By Debbie Strickland
Fueled by accelerating sales of its once-a-week multiple sclerosis drug, Biogen Inc. posted hefty earnings and revenue gains in the third quarter, which ended Sept. 30.
Net income surged 120 percent to $45.1 million, up from $20.5 million in the third quarter of 1996. Over the first nine months of 1997, Biogen's earnings totaled $57.4 million, a gain of 78 percent over the comparable period in 1996. (The comparison was affected by two one-time events in 1996 — a royalty payment and a tax benefit that, combined, equaled approximately $39 million.)
Earnings of $0.27 per share were just a hair off the analysts' consensus estimate of $0.28 per share. The company's shares (NASDAQ:BGEN) closed Thursday at $33, down $0.50.
Biogen's revenues for the quarter hit $106.2 million, a gain of 5.25 percent over last year's third-quarter figure of $100.9 million. For the year to date, the company tallied $303.6 million in revenues, up 64 percent over the comparable 1996 period's $185.1 million.
The bulk of revenues came from sales of the multiple sclerosis drug Avonex (interferon beta-1a), which took in $60.4 million in the third quarter, up 7 percent over second-quarter results.
Avonex was approved by the FDA in May of last year, and posted sales of $76.5 million in 1996. Sales jumped to $169.5 million in the first nine months of 1997.
"What was most important [in the earnings report] was that 29,000 patients in the U.S. were taking Avonex at the end of September," said analyst David Crossen, of Montgomery Securities, in San Francisco. He now predicts that by the end of 1997, at least 31,000 patients will be taking Avonex in the U.S.
"That exceeds my previous estimate of 30,000," Crossen said. "Avonex is continuing to show very good monthly increases in the U.S."
The drug also has been introduced in Italy, Spain and the Netherlands, but launches in Europe tend to move more slowly due to reimbursement complexities, Crossen said. He said the drug is doing "reasonably well" there, with approval in France expected by the end of the year.
European sales will likely heat up in 1998, predicted analyst Peter Drake, of Vector Securities International Inc., in Deerfield, Ill.
"We expect to see continued growth of Avonex both domestically and internationally," Drake wrote in a report on the earnings news.
The drug, he predicted, will likely continue "expanding the market of MS patients who take disease-altering therapy," in addition to winning over patients currently taking other drugs, including direct competitor Betaseron (interferon beta-1b).
Royalties Down, Pipeline Restocked
Biogen's other substantial revenue line item — royalties — sank 42 percent to $40.2 million in the third quarter, down from $69.2 million in the third quarter of 1996. For the year to date, royalties fell $20 million to $118 million, a decline of about 14 percent.
The major factor in the change was the inclusion in the 1996 results of a special $30 million royalty payment from Pharmacia & Upjohn Inc. for protein secretion technology used in Genotropin, a growth hormone product. That one-time payment, along with a pledge of additional ongoing royalties, resolved litigation in the U.S., Japan and Sweden.
On the expense side, Biogen's third-quarter research and development spending climbed 22 percent to $37 million in the quarter. For the year to date, R&D expenses were at $107 million, up 27 percent.
The boost stems from an expansion of the clinical trial pipeline, said Biogen spokesman Kenneth Keen. At this time last year, the company had two drug candidates in clinical trials — now there are five, four of them at the Phase II level:
* CVT-124, an adenosine A-receptor antagonist, for congestive heart failure;
* LFA3TIP, a T cell inhibitor, for severe psoriasis;
* Gelsolin, a recombinant form of a natural actin-severing agent thought to work by reducing airway mucus viscosity in cystic fibrosis patients;
* Avonex, for treatment of glioma.
A CD40 ligand antibody designed to inhibit B cells is in Phase I trials as a therapy for immune thrombocytopenic purpura, or ITP.
Biogen is conducting preclinical studies with OP-1, a recombinant osteogenic protein-1 believed to have production applications in renal disease.
The company expects by the end of the year to be managing more than 20 separate trials — including Phase IV tests of Avonex — at more than 100 sites in the U.S., Canada and Europe. *