That’s what some analysts who follow the biotech are saying. There’s uncertainty about Biogen’s pipeline and concern that existing products might face sales pressure because of growing competition for Avonex, a multiple sclerosis treatment, an area it now dominates. Wall Street also notes a looming decrease in Biogen’s share of the profits on drugs it co-markets with Genentech, The Wall Street Journal reports.

Biogen’s shares took off after the biotech responded to an offer from Carl Icahn, who owns roughly 4% of the stock, by saying it would open the bidding to others. The stock hit a 52-week high of $84.75 on Oct. 15, but slipped as some investors have grown skeptical and the company reported weaker-than-expected earnings last week. Biogen’s market value has surged from $15 billion a year ago to about $22 billion. A buyer would get a biotech pionner with extensive expertise in manufacturing proteins and a cash-generating drug, Avonex, that is the top-selling MS med.

But skeptics argue that while Biogen may hit its forecast of about $4.8 billion in revenue in 2010, up from an expected $3.1 billion this year, its future after that point is cloudy. Biogen, like the big drugmakers that might be interested in a deal, will face its own revenue pressure, says Caroline Stewart of Piper Jaffray, who says a buyout at current prices is “questionable.” A Biogen purchase, she tells the paper, “doesn’t really help them.”

Biogen says its valuation is up to those who might want to buy it. Investors “want to know that we’re not intransigent,” Biogen’s ceo Jim Mullen, said last month, near the time Icahn first spoke with the biotech. He added, “If somebody makes an approach for the company that is significantly above what we believe we can create for the shareholders in a reasonable period of time, then we’re going to be open to that conversation.”

Avonex generates 60 percent of Biogen’s revenue. But some analysts predict sales of the 11-year-old medicine will start to shrink soon. In its just-reported third-quarter results, Biogen reported 2 percent year-over-year growth in overall Avonex sales, but Avonex’s US sales fell and the biotgech noted overseas growth was due to favorable exchange rates. By 2009 or 2010, rival drugs now in late-stage trials from Novartis, Genzyme and others may be on the market. Biogen says Avonex is just one in a growing portfolio of MS drugs, the Journal writes.

The company’s No. 2 revenue generator, Rituxan, which has been approved for cancer and rheumatoid arthritis, is shared with Genentech, which helped develop it. Biogen’s share of Rituxan’s US profits is 40 percent, or $156 million in the third quarter. The companies are working to get Rituxan approved to treat lupus and MS, which could provide a boost to sales.

But under the agreement between the companies, Biogen’s portion of Rituxan profits will shrink by a quarter, to 30 percent, as soon as they launch a successor drug, something analysts predict will occur in 2010 or 2011. Biogen’s share of the new drug’s profits would also be 30%.

Biogen has launched an arbitration proceeding against Genentech, complaining about the “unilateral development” of follow-on drugs. Biogen’s chief financial officer, Paul Clancy, tells the paper the dispute “isn’t based on economics,” but “decision-making rights.” Outside the US, Roche sells Rituxan and pays the companies a royalty. But Roche’s obligation to pay royalties ends in 2009 for sales in most European countries. By 2012, it ends everywhere.

Tysabri, Biogen’s new MS medicine, was pulled from the market in 2005 because some patients using it in clinical trials died of a rare brain infection. It was reintroduced in 2006 and has grown to 17,000 patients. Biogen has predicted that 100,000 patients will be on the drug by 2010, most of whom will be outside the US. After 2011, though, growth will slow to 3 percent or elss, Bear Stearns’ Mark Schoenebaum predicted in a report last week, as rival treatments are expected to enter the market.

Biogen says it is confident about Tysabri’s benefits to MS patients. The FDA is also considering whether to approve the drug to treat Crohn’s disease, which could provide additional sales.

Tysabri, which is often used as a last resort for MS patients unsatisfied with other drugs, still warns of the potential for deadly brain infections on its label. So far, the condition hasn’t appeared in other patients. If it did, “the investment community will run for cover,” Mullen told the Journal last month, but “the patients are probably the most pragmatic of the whole grouping. They’ve already been told that’s a possibility. They’ve already had to weigh that.”

Analysts are also debating how to value Biogen’s pipeline of drugs in testing. For example, the company’s BG-12 could be one of the first oral medications for MS, but the three-times-a-day pill faces potentially stiff competition from Novartis’s FTY-720, a once-a-day pill also in late-stage tests.

Biogen says it has 15 drugs in midstage testing or beyond. Schoenebaum estimates the pipeline is worth $7 a share using his assumptions, or $15 a share to a “motivated buyer” who accepted the company’s more-optimistic forecasts about sales. In total, Schoenebaum thinks Biogen is worth $62 a share, using his own forecasts, to a drug-company acquirer that could cut out $750 million in redundant expenses. He thinks a “motivated buyer” would pay $81.

Stewart thinks Biogen is worth about $65 a share without cuts, based on her estimates of future revenue. But she considers a much higher bid from a motivated buyer unlikely. When Biogen “was $42 a share, yeah, it was cheap,” she says. “It’s not so cheap now.”

Source: The Wall Street Journal