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Biotech / Medical : Biogen
BIIB 199.54+3.3%May 20 3:59 PM EDT

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From: mopgcw7/18/2009 10:58:21 AM
   of 1684
CS: Biogen Idec. Inc. (BIIB) NEUTRAL [V] M. Aberman
CP: US$ 47.10 TP: US$ 54 CAP: US$ 13.6b
Good Quarter; Still Worried About PML, Revising Estimates

• Conclusion: There was a lot to like in Biogen's quarter with a top-line beat driven by reacceleration of Tysabri and Avonex
sales benefiting from a hefty price increase in the US and the weak US dollar. On the operating expense side, R&D was hit
by the Acorda deal but both SG&A and cost of goods came in below expectations leading to higher than expected EPS (ex-
Acorda). Despite the good quarter, we can not help but remain cautious over the recent cluster of PML cases, particularly as
they could portend a relationship between Tysabri duration and risk. We also wonder how long Biogen can continue to raise
prices at high double digit rates annually to maintain Avonex growth. While caution is winning the day for now we do envision
a day where we get over our Tysabri concern and pipeline catalysts are closer to being realized.

• What's New? Excluding the upfront payment of $110 M to Acorda, Biogen reported non-GAAP EPS of $1.07 vs. our estimate
of $1.03 and consensus of $1.02. The better than expected results were driven by higher product revenues with lower SG&A
and COGS. Guidance was updated for 2009 to incorporate the Acorda upfront payment.

• Implication: Remain Neutral with a $54 Price Target. We have adjusted our model to account for a near term Tysabri
reacceleration and Acorda payment. Our '09 EPS incl options comes down to $3.85 from $4.12 while our '10 EPS comes up
slightly to $4.15 from $4.13. We move our valuation to 13x our 2010 EPS estimate of $4.15 (including options). While we
prefer to sit on the sidelines while we wait to see if the current PML cluster is the "tip of the iceberg," we do think the valuation
is relatively attractive in the mid-$40s. That said, we believe the stock will remain range bound up to the low to mid-$50s until
investors gain confidence that PML cases will no accelerate and lead to another hit to sales. In the near term, we will look to
the next two weeks of PML updates and then again in September at the ECTRIMS meeting.
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