Biogen Inc., fueled by sales of the new multiple sclerosis drugAvonex, reported revenues of more than $100 million for the thirdquarter, the first time the company has topped that amount.

The Cambridge, Mass., company reported net income of $45 million,or $1.21 per share, on revenues of $101 million. Avonex, approvedin May, generated sales of $27 million in its first full quarter on themarket. In the third quarter of 1995 Biogen had earnings of $1.1million, or 3 cents per share, on revenues of $38 million.

The earnings "couldn't be better," said David Crossen, an analyst atMontgomery Securities in San Francisco. "They were very upbeatand the underlying message was very optimistic."

Crossen cited three positive aspects of the Avonex (interferon beta-1a) launch: it quickly gained 40 percent of the prescription multiplesclerosis market; the market is expanding because of Avonex; andthere hasn't been a big push yet by Biogen to convert patients toAvonex from Betaseron, a competing interferon beta product sold byBerlex Laboratories Inc.

"They are getting a much lower dropout rate from patients on theirdrug than Betaseron has seen," Crossen said. "Patients seem to bevery satisfied."

Biogen had been relying on royalty revenues until the approval ofAvonex. But the marketing clearance for the drug didn't comewithout a challenge from Berlex, a Wayne, N.J., subsidiary ofGermany-based Schering AG. Berlex sued a month before Avonexwas formally cleared for marketing, claiming that approval wouldviolate its rights under the Orphan Drug Act and that the productBiogen was going to sell wasn't the same one that went throughclinical trials.

On Tuesday any concerns about Biogen's position were put to restwhen a U.S. District Court judge dismissed the Berlex suit, therebysaying the FDA acted properly in approving Avonex. The judge saidAvonex was clinically superior to Betaseron and therefore theOrphan Drug Act didn't apply.

Biogen's stock gained $2.25 after Tuesday's court ruling and another$2.50 Thursday to close at $79.50 per share, a new high for the stock.The 52-week low is $49.25.

With the release of Biogen's earnings after the market closedWednesday, Chairman and CEO Jim Vincent said, "The Avonexlaunch is going extremely well, and generated sales of more than $27million in the quarter. We believe Avonex will soon be the marketleader. Physicians and patients have responded well to its convenient,once-a-week dosing and moderate side-effect profile.

"We expect to receive regulatory approval in the European Unionand to be selling in certain European markets in the first half of1997," Vincent said. "We also have filed for approval in othermarkets, including Australia, Canada and New Zealand."

Another area of strength in Biogen's third quarter was royaltyrevenues, which more than doubled to $69 million. Vincent said thatincrease was driven in part by hepatitis B vaccine sales in Germany,the latest major market to adopt a vaccination policy for infants andchildren.

Crossen estimated Avonex sales will increase significantly from the$73 million he is projecting this year. He estimated sales of $255million in 1997, $390 million in 1998 and $540 million in 1999.Those figures are similar to ones put out Wednesday by Peter Drake,an analysts at Vector Securities International Inc. in Deerfield, Ill.Drake estimated Avonex sales of $90 million this year, $260 millionin 1997 and $400 million in 1998.

Crossen said there currently are about 25,000 patients in the U.S.taking Betaseron and about that many who have stopped taking thatdrug. Biogen, he said, needs about 100,000 patients taking Avonex,and that can be accomplished by getting Betaseron patients to switchand expanding the market so more multiple sclerosis patients seektreatment.

Drake said the judge's decision that Avonex was clinically superiorto Betaseron will provide a marketing advantage. He also pointed outAvonex is the only approved product to slow progression of thedisease. Drake projected Avonex will become the No. 1 treatment formultiple sclerosis in the next year.

Ed Hurwitz, an analyst at San Francisco-based Robertson Stephens &Co., sounded a note of caution, however. He said in a reportThursday that the earnings were positive, but the stock already is nearits full value. "While we do not mean to detract from the progressBiogen is making, we do believe it is important for investors toexamine Biogen's valuation and whether the stock has meaningfulupside from current levels. Hurwitz said the stock should not bevalued at more than $81 per share price at the end of the year.

The $1.21 per-share earning exceeded the $1.08 and $1.04 estimatesmade by Crossen and Drake, respectively, and "blew out the Street'sestimate of $0.78," Drake said.

"We expect Biogen to continue to be the bellwether stock in thebiotechnology sector as Avonex becomes the No. 1 treatment forMS," Drake said Thursday. "We project that Avonex will becomeone of the best selling drugs of the 1990s." Drake estimated a year-end price target of $91, $10 more than projected by Hurwitz. n

-- Jim Shrine

(c) 1997 American Health Consultants. All rights reserved.