Cacaito, your friend Harmon posted this on another thread. You know what I think of Biogen management. Would dislike it even more if somehow there was a leak about future FDA actions. Really doubt it could be this. But who knows.
To:Richard Harmon who wrote (3167)
From: Richard Harmon
Wednesday, Aug 7, 2002 8:34 PM
Respond to of 3168
Wednesday August 7, 7:30 pm Eastern Time
STOCK TALK: BGEN-Who is Betting Against Biogen?, Frederic Ruffy, Optionetics.com
Someone appears to think that Biogen (BGEN) shares are set to fall because on Tuesday, Biogen's put volume was unusually heavy. There
was no obvious news to explain the abnormal activity. Some are speculating that it was associated with a Food and Drug Administration
review of the biotech company's psoriasis drug. If so, that would add to the long list of worries facing Biogen shareholders, who have
watched the stock tumble 40% this year alone.
Biogen is a Cambridge, Massachusetts-based biopharmaceutical company involved in the business of developing, manufacturing and selling
pharmaceuticals for human healthcare. Biogen currently generates much of its revenues from sales of Avonex, a treatment for the relapsing
forms of multiple sclerosis. Biogen also receives royalties on sales of its licensees on a number of products covered under patents. The
company employs roughly 2,000 employees and had revenues in excess of $1 billion last year. With a market capitalization of $5.4 billion,
in terms of size, Biogen ranks within the top 250 stocks within the S&P 500. BGEN is also a member of the AMEX Biotechnology Index
(^BTK).
Shares of the biotech giant have been sliding over the past two and a half years. After reaching an all-time high of nearly $130.00 a share in
February 2000, the stock suffered a two-month 60% plunge. From that point forward, BGEN stayed in a fairly narrow trading range until
the spring of this year. After that, the stock began another move south and has recently experienced another five-month 37% decline.
Shares of Biogen started weakening i n [FDA] approved Swiss-based Serono SA's multiple sclerosis drug Rebif. The approval of the drug
is seen as a blow to Biogen's Avonex, which is a multiple sclerosis treatment that has enjoyed “orphan status” in the United States. The
FDA grants such status to drugs that have relatively small patient populations in order to encourage drug-makers to produce it. Once
approved, orphan status effectively gives drug-makers seven-year exclusivity on their treatments. If, however, a competing product is deemed
more effective, the orphan status can be broken. Ultimately, the FDA's decision to allow the sale of Rebif is a sign that the administration
believes it to be more effective than Biogen's Avonex. In short, when the FDA broke Biogen's orphan status on the multiple sclerosis drug
Avonex, it was seen as a rather large blow to the biotech company. As a result, BGEN fell nearly 10% when the news hit the wires on March
7, 2002.
More recently, the stock has stabilized, but one large options trader appears to be betting on another move lower in BGEN. On Tuesday,
August 6, the October 30 puts traded heavily. These options give the buyer the right to sell the stock for $30.00 a share. 15,575 Biogen
October 30 puts traded, compared with open interest of 5,413 contracts. The chart below shows the sharp spike in the options activity. The
reason for the heavy put buying was unclear. In fact, on Tuesday, the stock moved modestly higher.
Some market watchers are speculating that the heavy put activity in Biogen on Tuesday was related to and FDA review of Amevive, a
psoriasis drug that an advisory panel had recommended for approval in May. Investors have been awaiting final approval of the drug for
many months and it is widely expected to happen this year. According to a January 8, 2002 Dow Jones Newswire report (“Biogen CEO
Reiterates 2002 EPS View of $1.90-$2.00,” by Beth Mantz),
After 2002, Biogen's world should change dramatically as it adds long-awaited products from its pipeline to the portfolio of marketed
medicines. Its psoriasis drug Amevive, which is five months into its regulatory review at the Food and Drug Administration, should be
cleared for sale this year, and could log about $500 million in sales by its third year on the market. Biogen's drug Antegren, codeveloped
with Elan Corp. (ELN), for fighting multiple sclerosis, has started late-stage human clinical trials and could start contributing to revenue in a
few years…As these medicines roll off the pipeline and onto the pharmacy shelves, Biogen expects its revenue to grow between 16% to
22% between 2003 through 2005, doubling its current sales base to about $2 billion by 2005, said [Biogen Chief Exceutive Jim Mullen].
Therefore, if it is widely expected that Biogen's Amevive drug is likely to be approved this year, analysts have pr hose expectations into
future earnings forecasts. In the event that approval is delayed, that will force estimates for the biotech company's earnings lower. That, in
turn, would also push the stock price lower, and, that is perhaps the explanation for the heavy put buying in BGEN on Tuesday.
Frederic Ruffy
Senior Writer & Index Strategist
Optionetics.com ~ Your Options Education Site |
