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Biogen Idec Outlines Restructuring Plan

Early Edge: Biogen Idec, LDK Solar Co., Hartford Financial Services, and Motorola, Inc.

From Schaeffer's Market Commentary (November 3, 2010)

Biogen Idec Inc. (BIIB) outlined the details this morning of a broad-based restructuring plan, which calls for the company to trim 13% of its head count, merge some of its research sites, and halt development on cardiovascular medications. The cost-cutting plan is expected to net BIIB savings of $300 million annually, so the firm can throw more muscle behind its flagship multiple sclerosis drugs, Tysabri and Avonex.

"We have been operating in too many therapeutic areas and haven't maximized our opportunities," explained new CEO George Scangos. "We will now focus on a few areas where we can be among the best, and this starts with neurology."

Additionally, BIIB adjusted its full-year earnings forecast for 2010. It now expects earnings to exceed $4.85 per share, compared to its previous guidance of $4.70 per share. Revenue growth is still expected to be in the mid-single digits.

BIIB has ticked fractionally higher ahead of the bell, adding to its year-to-date rally of 17.8%. The stock has now outpaced the short-term support of its rising 10-day and 20-day moving averages, and has been consolidating between $62 and $64 for the better part of the last week.

Options traders have rarely felt more pessimistic toward BIIB, despite the equity's respectable price action. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.97 ranks higher than 99% of other such readings taken during the previous year, as short-term speculators have been more bearish just 1% of the time.

Posted: November 2010