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Stock Analyst Update

Biogen Isn't a Screaming Buy

Weak Avonex sales mean the firm could still struggle for a while.


What Happened?
Biogen (BGEN) announced third-quarter earnings of $0.44 a share Tuesday, beating analysts' estimates by a penny. Sales of Avonex, Biogen's flagship multiple sclerosis drug, came in at $193.2 million, toward the low end of estimates. At $138 million, U.S. sales of the drug were basically flat from the previous quarter. On the other hand, international sales grew to $55 million, up from $51 million in the second quarter of 2000, despite a weak euro.

What It Means to Investors
We believe Biogen is in the early stages of a turnaround. But given the challenges the company still faces, we think only the most aggressive investors should consider jumping in now. Biogen's stock has been dogged for months by concerns over slowing Avonex growth and a weak pipeline of new products. It is now trading at about 31 times 2000 estimated earnings, making it one of the cheapest of the big biotech companies.

But Biogen is working hard to pull itself back into investors' good graces. In August it agreed to collaborate with Irish drug firm Elan (ELN) on the development of the MS drug Antegren. Moreover, management indicated in the conference call that it is looking to in-license at least one more product in the coming months. All these moves help bolster Biogen's weak pipeline, which is absolutely critical if the company is to continue to grow. Until Antegren and Biogen's other products, such as Amevive, move a little further through the pipeline, though, the stock still isn't a screaming buy.

Emily Hall does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.