October 22, 2008

Value in Biogen?

Biogen reported earnings yesterday that exceeded analysts expectations, which in turn sent the stock down 8% near its 52 week low of $40 a share. Why? The number of new patients using Tysabri, one of the company's lead drugs did not meet growth expectations.

As the Fool points out, Elan and Biogen had projected that 100,000 people would be using Tysabri by 2010. Now, it doesn't look like that number will be achieved, and other multiple sclerosis drugs could continue to steal away potential customers.

However, growth is growth which translated into a revenue increase of 38% over the previous year. The Fool is still bullish on the stock: "With Biogen trading at less than 13 times its expected adjusted 2008 earnings, the company is a real steal if it can continue to produce adjusted bottom-line growth in excess of 25%. While there's some risk of a slowdown, just like the risk/reward ratio for Tysabri, there seems to be a lot more reward potential than risk built into Biogen's stock price."

Zacks also seems to agree. They call the shares "significantly undervalued," and give the stock a fair value price of $58.

I agree that this stock is undervalued. Revenue and earnings increase and the stock is hovering near a 52 week low? Even if the growth prospects for Tysabri are not what they were first projected, any growth will certainly contribute to the company's bottom line.

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