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Biogen Stock Has Fallen 50%. Why It’s Time to Buy.

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Biogen’s Alzheimer’s disease treatment was once expected to be a megablockbuster.

Dominick Reuter/AFP via Getty Images

Shares of the biotech firm


Biogen

are down 50% since June 10, when the exuberance that greeted the Food and Drug Administration’s unexpected approval of the company’s Alzheimer’s disease therapy began to curdle.

Now, RBC Capital Markets analyst Brian Abrahams says it is time to buy the stock. Abrahams upgraded


Biogen

(ticker: BIIB) to Outperform, from Sector Perform, on Thursday morning, raising his target price to $248 per share, from $227.

The stock closed at $207.79 on Wednesday.

In his research note, Abrahams said that Biogen’s troubles may not be behind it, but that the stock is cheap enough to make it a good bet. “Challenges clearly remain but with sentiment at a low, upside/downside now looks more attractive,” Abrahams wrote.

Biogen stock now trades at 13.3 times the per-share earnings expected over the next 12 months, above its 5-year average of 11.4 times earnings.

Investors have faced a series of disappointments over the rollout of the Alzheimer’s therapy, known as Aduhelm, which had once been expected to be a megablockbuster. In February, Biogen reported Aduhelm revenue of $1 million for the fourth quarter of 2020, up from $300,000 in the third quarter. Sales have consistently missed Wall Street’s expectations amid uncertainty around reimbursement and efficacy of the drug.

In March, the Centers for Medicare and Medicaid Services released a draft decision saying that Medicare wouldn’t pay for Aduhelm, except in the context of a clinical trial. That was disastrous news for the drug because most Alzheimer’s patients in the U.S. are covered by Medicare.

Biogen has said that if CMS doesn’t change its decision before the final draft is released in April, it will undertake cost-cutting beyond the $500 million it had already announced.

Abrahams, in his note, said that surveys of physicians who treat Alzheimer’s disease remain interested in prescribing drugs like Aduhelm. If CMS does change its decision, or if another Alzheimer’s therapy in development at Biogen called lecanemab returns promising results, Biogen shares could rise again, Abrahams said.

What’s more, Abrahams says that shares have fallen far enough that more disappointments around Aduhelm are unlikely to hurt the share price. “At current levels

Abrahams said it is possible that Alzheimer’s could be “completely out of the picture” for Biogen. In that case, he acknowledged that there wouldn’t be much left to drive Biogen’s “narrative,” but says that the company would then need to do business development or more restructuring, which would “help extract more value from their neuro R&D capabilities.”

In a worst-case scenario—if the final decision from CMS doesn’t improve, and data expected in the second half of this year on lecanemab isn’t good— Abrahams said, Biogen shares without any credit for Alzheimer’s therapeutics would have a value of $186.

Biogen shares were down 1.2% on Wednesday, and up 1.4% in premarket trading on Thursday. The stock is down 13.4% this year.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

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