Biogen Idec Inc (NASDAQ:BIIB) stock surged on Friday, after a blowout fourth-quarter earnings release ignited a surge of investor optimism.
The Cambridge-based biotechnology company derives a vast majority of its business from its Multiple Sclerosis treatments, but Biogen’s ambitious venture into the treatment of Alzheimer’s disease is the real catalyst for BIIB stock moving forward.
BIIB stock traded as much as 11% higher Friday morning on the merit of 40% sales growth and earnings per share (non-GAAP) growth of 54%.
If money talks, then Wall Street was hooting and hollering upon the visage of the $4.09 EPS figure, a far cry from the $3.78 analysts expected.
What Drove Results
The spectacular quarter from BIIB was driven by higher-than-expected growth from the company’s three flagship MS drugs, Teccfidera, Avonex and Tysabri. Tecfidera in particular boasted revenue of $916 million in the fourth quarter, comprising 35% of Biogen Idec’s $2.6 billion revenue figure.
BIIB revenues were up 34% in the fourth quarter and 40% for the full year of 2014. The “Big Three” of Avonex (including its follow-up product Plegridy), Tecfidera and Tysabri accounted for a whopping $8 billion of the company’s $9.7 billion in revenue last year.
Hoping to further enhance its success in the area, Biogen recently partnered with Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) to study multiple sclerosis and how it emerges. The project will be a part of the Google X labs, the division of GOOG responsible for “moonshot” ideas.
What Will Drive Results Tomorrow
Sounds like Biogen has it all figured out, right? For now, they sure do, but with biotech stocks it’s all about the pipeline and the next blockbuster, especially when your original cash cows have divvied out their milk.
Now, BIIB stock may still have some legs by virtue of its MS treatments, but with quarter-over-quarter sales growth from Tecfidera slowing and most of the MS market already well aware of Biogen’s treatment options, the next phase of growth will need to come from another drug.
Thankfully for BIIB stock, the company is on top of that. The company is counting on its Alzheimer’s treatment, BIIB037, to pave the way for future Biogen stock gains.
BIIB expects data from BIIB037’s clinical trials this year, and the company fast-tracked the drug from phase 1b to phase 3 due to how promising initial results were. Because Alzheimer’s is usually a late-onset disease that strikes older folks, the unfortunate reality is that the aging of the Baby Boomers will likely cause demand for Alzheimer drugs like BIIB037 to skyrocket.
A brief glance at the demographics of the U.S. shows the graying of America in a simple table. The 2008 numbers are from the U.S. Department of Health and Human Services, so the 2010-2050 figures are projections:
One can only imagine that demand for Alzheimer’s treatments will rise as Americans age, and there’s a huge opportunity for whatever company is able to successfully treat or cure the debilitating disease.
While BIIB stock is about MS today, the catalyst of tomorrow is Alzheimer’s, and if BIIB037 can prove its efficacy in its trial data later this year, expect there to be another run-up in the stock price.
As of this writing John Divine owned shares of GOOG stock and GOOGL stock. You can follow him on Twitter at @divinebizkid.
