Biogen: First-Class Biotech

10/30/2013 7:00 am EST


Stephen Leeb

Founder and Research Chairman, Leeb Group

Our new recommendation is a first-class drug franchise with a compelling stock valuation, says Stephen Leeb in The Complete Investor.

Biogen Idec (BIIB) has several major first-line treatments for virtually all forms of MS, including Tysabri, widely considered the best treatment for severe MS cases.

One problem for Tysabri has been a serious side effect in some patients, but the recent development of a test to assess a patient's vulnerability to that side effect should expand the drug's market.

The company also has three other major MS drugs—both oral and injected—growing rapidly or close to approval.

In addition to its grip on the more than $10 billion MS market, Biogen, in conjunction with Roche, markets Rituxan, a first-line treatment for both non-Hodgkins lymphoma and rheumatoid arthritis.

Biogen will be introducing drugs likely to give it a franchise in the hemophilia market, and in 2015, will launch a potential first-line treatment for the critical childhood disease, spinal muscular atrophy.

Each market represents more than $1 billion in revenues. Longer term, the pipeline includes more drugs for MS, and for lupus, and neuropathic pain.

In 2015, profits should be nearly triple 2012's level, leaving the forward P/E on 2015 profits at a very modest 14. Free cash flow yield should rise from under 3% to about 7.5%.

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