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Summary

  • Biogen received the FDA approval for its breakthrough drug, Eloctate. It is the second FDA approval following the authorization of its Hemophilia B therapy, Alprolix.
  • Eloctate is the first recombinant hemophilia A therapy with extended circulation in the body.
  • The share price should go up by the present value of $1.52 based on the earnings potential of the drug launched.
  • The addition of Eloctate in Biogen’s product portfolio offers investors an opportunity to earn a decent return by investing in the stock.
  • Biogen offers return only in the form of capital appreciation and not dividends.

Biogen Idec Inc. (NASDAQ:BIIB), another big name in the pharmaceutical industry, is trying to keep up its pace with the market by focusing on discovering new innovative drugs and therapies to meet the health care needs of the public at large and provide a decent return to its shareholders. The company has recently launched a breakthrough drug, Eloctate, for the treatment of Hemophilia A in the United States for both adults and children. Biogen also received the FDA approval for its Hemophilia B's therapy, Alprolix, a few months ago.

Let's take a look at the prevailing market of Hemophilia A and the probability of success for Biogen to make money out of its discovery.

Prevalence of Hemophilia

Hemophilia is caused due to missing or deficient protein needed for blood clotting. The two major types include: hemophilia A (factor VIII deficiency) and hemophilia B (factor IX deficiency).

The incidence of Hemophilia A is 1 in 5,000 live male births and it is nearly four times more common as compared to hemophilia B. In the US region, the number of people inflicted with hemophilia is calculated approximately to be about 20,000 individuals. The global occurrence of hemophilia is not completely known, but the ballpark figure is more than 400,000 people. Almost 75% of the individuals affected by hemophilia around the world still get insufficient treatment or none at all.

Probability Of Success For Biogen

Currently, there is no cure for hemophilia. Biogen's Eloctate is the first recombinant hemophilia A therapy with extended circulation in the body. Being the only recombinant treatment now available for hemophilia A, it aims to decrease the occurrence of bleeding episodes with prophylactic infusions every three to five days. It offers the patients of hemophilia A the potential to increase the time in between prophylactic infusions. The drug will be available for purchase from July, 2014.

According to George A. Scangos, Ph.D., chief executive officer of Biogen Idec, "The proven ability of ELOCTATE to provide protection from bleeding episodes with prolonged circulation marks the first significant hemophilia A treatment advance in more than 20 years". During the clinical trials, Eloctate proved to be effective for both routine prophylaxis and for treating acute bleeding episodes. It showed a positive safety and tolerance profile. "As a company deeply committed to improving the lives of people with hemophilia, we are excited to bring this important innovation to those living with hemophilia A."

Last September, a research study consisting of more than 150 hemophilia treating physicians, conducted by market research consultancy ZoomRx, established that both Biogen's hemophilia drugs could potentially capture and grow the market as a whole. Researchers had concluded back then "ELOCTATE and ALPROLIX are poised to capture a significant share of the hemophilia market and also grow the market by increasing prophylactic treatment".

Eloctate is also currently under review of the regulatory bodies in many other countries including Canada, Australia and Japan.

Bottom Line Impact Quantified

The company has the opportunity to exploit the first mover advantage and grab a large chunk of the $6 billion Hemophilia A market as the drug is one to two years ahead of its potential rivals. Along with the competitive price package that the company plans to charge and less frequent dosing required, more doctors and patients are expected to adopt this treatment. In fact, the analysts at Thomson Reuters have predicted sales revenue to reach $1.5 billion by the fiscal year 2019. Applying the 5-year average net profit margin of 24%, this is expected to generate earnings of $0.36 billion or $1.52 on a per share basis. The share price should go up by the present value of $1.52 based on the earnings potential of the drug launched.

Final Verdict

The company's series of Hemophilia drugs is critical to effectively serving the needs of the patients with the disorder. Moreover, the difficult economic time that the US is undergoing, blockbuster launches like Eloctate offer investors an opportunity to earn a decent return by investing in the stock. Biogen offers return only in the form of capital appreciation and not dividends. Therefore, I recommend buying the stock for the investors seeking capital gains.

Source: Biogen: The Pioneer In The Hemophilia A Market