Has Biogen Idec Become Too Expensive? (BIIB)
Biogen Idec Inc. (NASDAQ: BIIB) is up nearly 4% today on news that ISI Group raised its rating to BUY from HOLD. The driving force is Biogen’s promising MS drug candidate BG-12 with the belief that earnings can grow exponentially in the years ahead. If one company has a lock on the MS market, it is Biogen Idec.
The report today has shares up nearly 4% at $98.47 late in the day. The consensus analyst price target is $104.13 and the 52-week trading range is $46.15 to $106.99.
Our take is that the consensus price target objective of $104.13 is just not enough upside to merit a new purchase for a biotech giant. We will be the first to admit that consensus price targets are very far from perfect. In early January, Biogen Idec was “Overvalued” if you just used the projected consensus price target of the time. At that time, Biogen was trading at $67.20 and its implied consensus analyst price target objective was $62.83. The price target was just wrong in the start of 2011.
A lot has happened since then and shares are massively higher. The earnings estimates are $5.88 EPS for 2011 and $6.20 EPS for 2012, generating forward earnings multiples of 16.75-times 2011 expected earnings and almost 15.9-times expected 2012 earnings.
There are two sides to most coins. The company can now probably act without too much Carl Icahn input.
JON C. OGG
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