Biogen Idec Inc. (BIIB) is an US-based company that concerns itself with the discovery, development and manufacturing of therapies for the treatment of several diseases such as hemophilia, autoimmune disorders, multiple sclerosis and neurodegenerative diseases. The company was founded in 1985 and its headquarters are located in Cambridge Massachusetts. Biogen Idec Inc. was formerly known as IDEC Pharmaceuticals Corporation before changing its name in November 2003.
Biogen finds itself in the Biotechnology industry, which is the second largest industry in the Healthcare sector, a sector that has a market capitalization of over 60 trillion dollars and an average ROE of 18.42%. The Biotechnology industry shares its participation with many other important industries in this sector such as: drug manufacturers, medical appliances & equipment, health care plans, etc.
This Cambridge-based company is the leader in multiple sclerosis (MS) research and has developed a series of very effective treatments for this disease. Biogen Idec has an extremely high concentration on research and development and it’s committed to environmental sustainability, being ranked second in the Global 100 Index.
Industry at a glance
The Biotechnology Industry uses living organisms and cellular techniques to provide chemicals, food and services (in the form of treatments) that meet human needs. The primary activities of this industry are: cell tissue culture engineering, protein sequencing, synthesis and engineering, and DNA coding, mapping and sequencing. On the other hand, the services and products provided by this industry range from agriculture and aquaculture technologies to animal and human health technologies; the last take up 57% of the total composition of the industry (see Exhibit 1).
The Biotechnology industry has over 1,900 businesses, which add up to a total of $98.5 billion in revenues and $5.7 billion in profit; this means that companies have an average profit margin of 5.79%. When it comes to market share, the industry has four major players that make up for more than half of the industry’s capitalization: Gilead Sciences, Amgen Inc., Genentech and Monsanto (see Exhibit 2).
The Biotechnology industry is relatively young and rapidly growing industry with very promising growth prospects in the next 5 years. The peculiarity of this industry is that it has a very wide range of product applications and target markets and also a large number of disparate firms. Due to the industry’s highly diverse nature, revenue growth is influenced by many factors. The key external drivers influencing industry performance are: investor uncertainty, R&D expenditures, prices of agricultural commodities and medical needs from the general population.
Investor uncertainty is tremendously important for this industry because of its high reliance on large capital investments to function. As investor uncertainty grows, access to investments narrows. During 2014 investor uncertainty has decreased, posing a great opportunity for the industry.
Other determinant factors which influence performance are R&D expenditures and technology. Biotechnology is one of the most active industries when it comes to research and development. Investment in R&D is key for the development for drugs, vaccines, disease resistant crops, enzymatic manufacturing processes, etc.
The demand and price of corn influences agricultural activity and increases the demand for agricultural technologies provided by this industry. Since the amount of available land for harvest is decreasing, more efficient technologies are required to produce food products and fuel from corn; here’s is where biotechnology firms come in. Finally, more than 50.0% of the industry’s revenues come from the sale of healthcare products. Factors such as: aging of the population, life expectancy and increase of medical needs and treatments drives up the…