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Not another PML case…

Biogen Idec announced on Wednesday (Oct. 29, 2008) that another case of progressive multifocal leukoencephalopathy (PML) has been reported in a patient receiving the company’s multiple sclerosis (MS) drug, Tysabri.  This is the sixth overall case of PML reported in patients taking Tysabri and the third since the drug was reintroduced on the market in June 2006.

The news has again affected the commercial outlook of Biogen Idec as well as its commercial partner Elan.  Shares of Biogen Idec stock fell around 10% upon the news (down from US$ 44) and are now trading at US$ 41.65.

View the full BIIB chart at Wikinvest

The news has me rethinking a valuation model I developed for Biogen Idec (BIIB) during graduate school (actually, the first financial model I ever built).  My assignment was to develop a buy/sell/hold argument for BIIB and construct a revenue forecast and valuation to defend my case.  

At the time (early 2006, prior to the reintroduction of Tysabri) I found it incredibly difficult to imagine Biogen’s future earnings because of the safety concerns revolving around Tysabri and the accompanying uncertainty about the drug’s reintroduction into the market.  

My thought process at the time focused on the point that even if the FDA returned the availability of Tysabri to patients with MS, wouldn’t it be a matter of time before the safety concerns manifested again?  And if they did resurface, wouldn’t this be a proverbial thorn in Biogen’s side?

The answer to both of those has turned out to be “yes”?

So, as an exercise in revisiting my own forecasting, I’d like to revisit the discounted cash flow (DCF) model I prepared in grad school, compare it to the Biogen Idec’s intervening performance, and present a new forecast for the company’s future.


Click below for a more detailed look at Biogen Idec’s pipeline:



October 31, 2008 - Posted by | Biotech | , , ,

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