GS: Biogen Idec, Inc. EPS (FY Dec) 2004E $1.34, 2005E $1.70 Outperform/Neutral
(BIIB) $52.91
CMS raised the Medicare payment on 9 drugs, including Avonex, given in physician
offices. Effective 4/1/04, the rate would be 89%. Previously, the rate was cut from
95% in 2003 to 85% in 2004 as w/ most drugs in physician offices. The increase for
Avonex is an exception to ensure adequate coverage of physician costs based on
filings by BIIB which included actual data on sales prices. The increase is a slight
positive as there was no increase for competing products, such as Rebif, Betaseron
and Copaxone. There will be limited impact on earnings as Medicare patients
represent less than 5% of the Avonex patients. We continue to rate BIIB Outperform
based on earnings acceleration from potential launch of Antegren in '05 and data
from 4 Phase III trials (combined potential of $2B in 04/05). Recent concerns about
Avonex are probably overdone. BIIB shares are at 40X our '04 EPS or PEG of 1.8, in
line with the group. The risks are slower sales, development failures, manufacturing,
reimbursement & generics. Our coverage view is Neutral. |
