01—Abstract
Summary
Summary of the 10-K filed February 4, 2015. Cited figures are marked; the original filing is the authoritative source.
Biogen Idec's FY2014 10-K shows a company in a strong commercial inflection, with total revenues rising 40.0% to $9.70 billiona and income from operations up 57.9% to $3.97 billion.
Diluted EPS reached $12.37b versus $7.81 in 2013. Growth was driven primarily by TECFIDERA, which generated $2.91 billion in worldwide revenue (up 232%), alongside TYSABRI ($1.96 billion, up 28%) and the launch of PLEGRIDY, ALPROLIX and ELOCTATE. AVONEX remained flat at $3.01 billion, and unconsolidated RITUXAN/GAZYVA joint business revenue grew 6.2% to $1.20 billion.
The filing also flags meaningful headwinds and dependencies. Management expects roughly $130 millionc lower royalty revenue in 2015 as ANGIOMAX royalties ended with patent expiry in December 2014, and amortization of acquired intangibles is projected to decline modestly from $344 million in 2015. Revenue remains concentrated in MS products, with TECFIDERA, AVONEX, TYSABRI and RITUXAN named as principal products, and competition, pricing pressure in Europe and the U.S., and generic/biosimilar entry are cited as key risks.
Two wholesalers (AmerisourceBergen and McKesson) account for a large share of gross product revenue, and receivables in Spain, Italy and Portugal remain slow to collect. Cash, cash equivalents and marketable securities rose to $3.32 billiond, operating cash flow was $2.94 billion, and the company repurchased $887 million of stock during the year.
Pipeline commitments are substantial, with about $2.8 billion in potential milestone payments to third parties and a Fumapharm contingent payment obligation that continues to grow with TECFIDERA sales. The company also announced a planned $200 million upfront acquisition of Convergence Pharmaceuticals in January 2015.
02—Key points
Key Highlights
- Total revenues grew 40.0% to $9,703.3 million, and income from operations rose 57.9% to $3,972.4 million.
- Diluted EPS of $12.37 increased 58.3% from $7.81 in 2013.
- TECFIDERA revenue reached $2,909.2 million, up 232.1%, establishing it as the primary growth driver in MS.
- AVONEX revenue was essentially flat at $3,013.1 million (+0.3%) as patients transitioned to oral and newer MS therapies.
- ANGIOMAX royalty revenue ceased after patent expiry on December 15, 2014; management expects about $130 million lower royalty revenue in 2015.
- Cash, cash equivalents and marketable securities totaled $3,316.0 million, and $886.8 million was returned via share repurchases in 2014.
- Management expects pricing pressure and generic/biosimilar competition to affect MS and other franchises, and Europe receivables in Spain, Italy and Portugal remain slow to collect.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Biogen Inc. kept $0.30.
- Revenue$9.70B100.0%
- Cost of revenue−$1.17B12.1%
- Gross profit$8.53B87.9%
- Operating costs−$4.56B47.0%
- Operating income$3.97B40.9%
- Interest, other & tax−$1.04B10.7%
- Net income$2.93B30.2%
Where FY2014 revenue went
$9.70B- Net income: $2.93B, 30% of revenue
- Other operating costs: $2.33B, 24% of revenue
- SG&A: $2.23B, 23% of revenue
- Cost of revenue: $1.17B, 12% of revenue
- Interest, other & tax: $1.04B, 11% of revenue
Kept 30% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 4, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $9.70B$6.93B | +40.0% |
| Cost of Revenue | $1.17B$857.70M | +36.5% |
| Gross Profit | $8.53B$6.07B | +40.5% |
| SG&A Expenses | $2.23B$1.71B | +30.4% |
| Operating Expenses | $5.75B$4.44B | +29.4% |
| Operating Income | $3.97B$2.52B | +57.9% |
| Interest Expense | $29.50M$31.90M | −7.5% |
| Net Income | $2.93B$1.86B | +57.6% |
| EPS (Basic) | $12.42$7.86 | +58.0% |
| EPS (Diluted) | $12.37$7.81 | +58.4% |
| Shares Outstanding (Basic) | 236.40M236.90M | −0.2% |
| Shares Outstanding (Diluted) | 237.20M238.30M | −0.5% |
05—Questions
Frequently Asked Questions
What drove Biogen's large earnings increase in 2014?
Revenue growth was led by TECFIDERA, which rose to $2.91 billion from $876 million in 2013, along with the full-year TYSABRI contribution after the April 2013 acquisition of all remaining rights from Elan and new hemophilia and PLEGRIDY launches. Operating income also benefited from higher product revenue, partially offset by increases in cost of sales, R&D, SG&A and amortization.
How dependent is Biogen on its MS franchise?
Very dependent. The company identifies TECFIDERA, AVONEX, TYSABRI and RITUXAN as principal products, and the MS franchise (including AVONEX, PLEGRIDY, TECFIDERA, TYSABRI and FAMPYRA) accounts for the large majority of product revenue. Competition from new oral and injectable MS therapies, generics and biosimilars, and label safety issues such as PML for TYSABRI and TECFIDERA are central risks.
What near-term revenue headwinds should investors expect?
ANGIOMAX royalties ended in December 2014, and management expects royalty revenue to fall by about $130 million in 2015 as out-licensed patent economics decline. AVONEX unit volume is also declining as patients switch to TECFIDERA and PLEGRIDY, and European pricing actions and austerity measures continue to pressure ex-U.S. revenues.
What are the company's major future financial commitments?
Biogen reports approximately $2.8 billion in potential contingent milestone payments to collaborators, about $142 million of which it anticipates paying in 2015. It also owes Fumapharm contingent payments of $300 million per additional $1 billion of cumulative product sales above $3 billion, a $250 million accrual was recorded at year-end 2014, and TYSABRI royalties to Elan are 18% to 25% of worldwide net sales.
What corporate events occurred after year-end 2014?
In January 2015, Biogen announced plans to acquire Convergence Pharmaceuticals for a $200 million upfront payment plus up to $475 million in milestones, focused on its Phase 2 neuropathic pain candidate CNV1014802. Completion is subject to customary conditions, including U.S. antitrust clearance under the Hart-Scott-Rodino Act.
06—Continue