Biogen Idec Augmented by Risk

Source: http://www.zacks.com/stock/news/14234/Biogen+Idec+Augmented+by+Risk
Posted on Thursday, August 14th, 2008 | In Market Commentary, Stocks to Watch

Contributed by: Zacks Market Commentaries (http://www.zacks.com/) -

Biogen Idec, Inc. (BIIB) posted solid results in the first half of 2008, driven by solid sales of both multiple sclerosis drugs Avonex and Tysabri. Yet, just when things were looking solid from a fundamental standpoint, two cases of progressive multifocal leukoencephalopathy (PML) popped up in Europe.

As a result, we have adjusted down our Tysabri over the next several quarters by approximately 15 percent. Visibility is low, and fears of more PML cases to come are creating significant angst.

Yet, Tysabri PML aside, Biogen’s pipeline may be the best in biotech. The name would truly be an excellent take-out candidate for a large-cap pharma name. That is, if the Tysabri-PML risk can be quantified. Or, if the stock gets so cheap that even with the Tysabri-PML risk, it’s worth a takeout.

The near $20 point drop in stock price has created an attractive long-term entry price. Unfortunately, however, over the near-term, the stock will probably be stuck in sideways trading range while the market digests the resurgence of PML risk.

Biogen’s stock is currently trading at 15x 2008 EPS, a premium to most large-cap pharmas, but a discount to the biotech peer-group. Still, the pipeline and manufacturing capacity certainly make the name look intriguing. We expect data on several of these pipeline candidates in 2008 and 2009. This may be the catalyst that investors, or a large-cap pharmaceutical company, are waiting for. In the meantime, we see $56 as fair value; or 16x our 2008 EPS of $3.54.

Read the full analyst report on BIIB

“BIIB” Free Stock Analysis: Buy? Sell? Hold?
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