Panic selling in Biogen-Idec and Elan represent great buying opportunity

In July, Biogen-Idec and Elan, who co-market the multiple sclerosis drug Tysabri, announced two new cases of PML a potentially deadly side effect. The stocks sold-off almost entirely. Biogen-Idec lost about 30% of its market share while Elan has lost over two thirds of its value.



I had previously recommended shares of Biogen-Idec right after the buy-out rumors vanished and the stock was trading around 54. I had based that recommendation of the potential success of Tysabri.

In August, both biotech companies announced no plans to take Tysabri off the market and I don't anticipate that FDA will force them to do so. Tysabri was voluntarily taken off the market in 2006, when the first case of death from PML became public. This resulted in an investigation and a strong warning label in addition to physician training to look for signs of PML.

Today, more than 30,000 patients are being treated with Tysabri with no better options. This however may change in the future as other companies, including Genzyme have MS products in the pipeline.

Until then, both Elan and Biogen-Idec will continue to profit from Tysabri and their shares are undervalued at this time.

Disclosure: The author does not have any positions in either Biogen-Idec or Elan.

Biogen-Idec (BIIB), from one extreme to the other in no time!

On Ocotber 16th, shares of Biogen-Idec (BIIB) gained $13 to hit $82 based on rumors that the company had put itself up for sale. That day I recommended an aggressive sell because of the price tag and uncertainties around finding a possible suitor. (Here is the Link to that article)





Today Biogen-Idec announced that it did not find a buyer and it was going to continue as a stand alone company. BIIB shares lost about $20 and was trading as low as $54, much lower than its share price before all the rumors began when the stock was in the $60s.





I like BIIB once again based on valuations and oversold technical conditions. The company is expected to earn over $3 share in 2008 which puts the forward PE at a cheap 18. Tysabri, their expensive treatment for MS, will continue to gain momentum in 2008 and the company expects to have 100,000 patients enrolled by 2010.








Disclosure: The author has a long position in Biogen-Idec.

Take profits in Biogen-Idec (BIIB)

The rumors of a buy out sent Biogen-Idec (BIIB) shares up about $13 dollars to over $82 per share. I first recommended BIIB last year at $44.6 based on the potential success of Tysabri in treating MS (link to that article). As of today's price, the stock is up 84% and I am recommending to sell and to take any profits as I believe a buyout is far from certain and any changes to these speculations will send the stock back down to $70.

Buying at these levels is definitely not recommended since the price is way too expensive based on fundamentals.




Disclosure: The author does not have a position in BIIB at this time.

Biogen-Idec(BIIB) The bar is set low for Tysabri

Tysabri was first launched in 2005 as a revolutionary treatment for Multiple Sclerosis, an autoimmune disease affecting the central nervous system. Tysabri, a biologic co-developed with Elan (ELN), showed great success in clinical trials. It was really a miracle drug that helped many patients live pain free lives for the first time.

Then there were a few cases of complications and deaths from Tysabri. Although, these cases were rare and occurred in patients with complicated cases often on many different therapies, Biogen-Idec voluntarily took it off of the market to access its safety. A year later, Tysabri is back on the market and many feel that it's image has been tarnished.

I beg to differ. Tysabri meets my blockbuster criteria ( see my other article where I explain my success criteria for biotech companies link). It is truly a novel medication in a disease that has been poorly treated to date and has a huge market size. One of it's negative attributes is that it is a biologic and must be injected in a physician's office. This is actually not a bad trait since it helps minimize mid-dosing problems. There are a few successful injectables on the market such as Enbrel).

I also think the delay has had operational and logistical benefits for Biogen-Idec. The company has had more time to optimize its launch strategy and will be simultaneously launching in Europe. Also, it is not a cheap drug. At about $20K per year it could quickly add to the bottom line.

Yes physicians and patients as well as Biogen-idec employees will be very careful to look for signs of complications, but the positive aspects of this drug is too good and should help overcome these challenges. Another positive is a lack of hype for this drug. I don't believe the upside has been captured here. This very important because most companies with blockbusters have so much anticipation built into them that any slip up will cause the stock to tank.

I expect a modest upside surprise in Tysabri in Q3 but definitely expect an increase in estimates in Q4. Today BIIB closed at $44.6 and trading at about 18.5 times 2007 earnings a very low multiple for this type of stock (link to chart). 2007 is only a few months away and historically these stocks trade at about 30-35X current year. At 14.9 billion in market cap it is a very cheap biotech stock. Biogen-idec has a lot of cash and has been investing heavily to boost it's pipeline. I think BIIB should be accumulated at these levels with intentions of selling in the 60's in 2007. The price increase will be supported by increased earnings as well as increased in PE ratios paid for this company. The chart will not give a strong buy signal until the stock crosses above it's current 200 moving average of about $45. But I am a buyer at any level below here.

JMHO