Will Biogen Stock Come Back Amid Pessimism Surrounding Aduhelm Rollout?

by Trefis Team
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[Updated: 9/16/2021] Biogen Stock Update

A few months back we discussed that the stock price of Biogen (NASDAQ:BIIB) can see a rebound after falling 10% in a week, based on its historical performance. However, BIIB stock has seen a decline of over 12% since then, and it is down 7% in the last five trading days. The recent decline can be attributed to the slower rollout of its prized drug – Aduhelm – approved for the treatment of Alzheimer’s disease. There are multiple factors impacting its rollout, including lack of clarity for its reimbursement, and questions raised on its ability for effective treatment.

Now, BIIB stock rallied on the back of the U.S. FDA approval for Aduhelm from levels of around $267 seen on June 1 to as high as $415 on June 10. But with a series of developments, mostly negative, surrounding Aduhelm, the stock has now declined to levels of under $300, barely 12% above the levels before Aduhelm was approved. We believe that the selling now appears to be overdone. Although it is having a challenging rollout, Aduhelm’s peak sales are pegged north of $10 billion, and the sales are likely to pick up as more centers administer the treatment. Even if we look at the average of analysts price estimate for Biogen of $415, it reflects a large 38% premium to the current market price of $299.

Looking at the near term, according to the Trefis Machine Learning Engine, which identifies trends in the company’s historical stock price data, returns for BIIB stock average nearly 3% in the next one-month (21 trading days) period after experiencing a 5% drop over the previous week (five trading days) with a good 63% probability of a positive return. Our dashboard Biogen stock chances of a rise has more details.

 

[Updated: 6/28/2021] BIIB Stock Decline

The stock price of Biogen (NASDAQ:BIIB) has seen a 10% drop over the last five trading days. BIIB stock has seen a massive rally from levels of $267 in early June to around $380 last week, before dropping to $348 currently. The sharp rise in the stock can be attributed to the U.S. FDA approval of Aduhelm, Biogen’s treatment for Alzheimer’s disease. The decline over the last week can be attributed to controversy surrounding the approval of Aduhelm. One of the advisory panel members who assessed the benefits of Aduhelm, was against the approval, and three members of that panel have quit after the FDA went ahead with the approval. [1] Furthermore, late last week, The House Committee on Oversight and Reform announced that it will launch an investigation into the Aduhelm approval as well as its high price tag of $56,000 in annual cost.

Aduhelm’s approval was a landmark victory for Biogen, given that it is the first approved drug that can actually slow down the progression of Alzheimer’s disease, and this development had a rub-off effect on many other pharmaceutical companies, which are currently developing a treatment for Alzheimer’s disease. The importance of Alzheimer’s treatment stems from a huge demand with over 35 million patients worldwide and over 5 million in the U.S.

Looking at Biogen’s stock performance, now that it has fallen 10% in just five days, will it resume its downward trajectory over the coming weeks, or is a rise in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in the company’s historical stock price data, returns for BIIB stock average nearly 2.2% in the next one-month (21 trading days) period after experiencing a 10% drop over the previous week (five trading days).

We continue to believe that the stock is likely to rise going forward, and long-term investors can use the recent dip to buy BIIB stock for better returns. Biogen’s opportunity with Aduhelm is very large with peak sales estimated to be as high as $10 billion. While the stock may trade based on the developments around its recent controversy, the company is working toward a rollout for the drug later this year, which will bolster its revenue growth going forward.

But how would these numbers change if you are interested in holding BIIB stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Biogen stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

Some Fun Scenarios, FAQs & Making Sense of Biogen Stock Movements:

Question 1: Is the average return for Biogen stock higher after a drop?

Answer: Consider two situations,

Case 1: Biogen stock drops by -5% or more in a week

Case 2: Biogen stock rises by 5% or more in a week

Is the average return for Biogen stock higher over the subsequent month after Case 1 or Case 2?

BIIB stock fares better after Case 1, with an average return of 2.8% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of -0.8% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Biogen stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Biogen stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For BIIB stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Biogen stock by changing the inputs in the charts above.

 

[Updated: 6/8/2021] BIIB Stock Rise Over Alzheimer’s Treatment Approval

We believe that the stock price of Biogen (NASDAQ:BIIB), a biotechnology company focused on treatments for neurological diseases, looks attractive at current levels of $396, despite it being up 38% from the levels of around $290 it was at yesterday morning. The sharp jump in BIIB stock can be attributed to the U.S. FDA’s approval of Aduhelm, Biogen’s treatment for Alzheimer’s disease. Note that there is no other approved therapy for Alzheimer’s disease, and the market size is over 35 million patients worldwide. Biogen’s treatment is expected to cost $56,000 annually, implying Aduhelm will be a blockbuster drug for the company. [2] While there were concerns raised by several scientists on the drug’s effectiveness, the U.S. FDA concluded that the overall benefits of Aduhelm outweighed the risk to patients. This marks a significant approval and Biogen stock is likely to see much higher levels.

BIIB stock is also up 32% from the levels of around $300 seen toward the end of 2018. The 32% rise over the last two years or so is justified given the earnings growth. Biogen’s total revenue of $13.4 billion in 2020 compare to $13.5 billion in 2018. This can partly be attributed to a decline in demand and pricing for Tecfidera, due to generic versions entering the U.S. market last year. Also, the company saw its net margins contract 290 bps to 29.8% in 2020, compared to 32.9% in 2018, resulting in a 10% decline in net income. The company’s total shares saw a decline of 21% over this period, and on a per share basis, earnings grew a solid 15% to $24.86 in 2020, as compared to $21.63 in 2018. Despite the earnings growth over the recent years, Biogen’s P/E multiple has contracted from 14x in 2018 to 10x in 2020. Our dashboard, ‘What Factors Drove 32% Change In Biogen Stock between 2018 and now?‘, has the underlying numbers.

So what’s the likely trigger and timing for upside?

Biogen’s stock rise of 32% over the last two years or so compares with roughly 70% growth for the S&P500 over the same period. BIIB stock has partly been weighed down due to Roche’s Evrysdi (risdiplam) approval by the U.S. FDA for the treatment of spinal muscular atrophy (SMA). Biogen’s Spinraza has been a blockbuster drug for the treatment for SMA with sales growing from under $900 million in 2017 to north of $2.0 billion in 2020. Now with Roche’s Evrysdi approval, Spinraza will face stiff competition. Biogen’s Multiple Sclerosis portfolio, which includes blockbuster drugs, such as Fumarate, Interferon, and Tysabri, has also seen a slowdown in sales.

That said, investors have long been hoping for Aduhelm approval, and now that it has come through, it will be the defining factor for Biogen’s future revenue growth. Aduhelm’s peak sales are estimated to be as high as $12 billion. For perspective, Biogen’s total sales stood at $12.6 billion over the last twelve month period. Furthermore, now that several countries have undertaken large scale Covid-19 vaccination programs, the overall new patient starts will be higher, boding well for Biogen. Despite a large 45% move over the last five trading sessions, we believe BIIB stock can see much higher levels in the near term, primarily due to a sharp pickup in sales and earnings as Aduhelm hits the market.

While BIIB stock may see higher levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for TJX vs Abiomed.

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Notes:
  1. FDA releases fresh details on internal debate over controversial Alzheimer’s drug, The Washington Post, Jun 23, 2021 []
  2. Alzheimer’s drug from Biogen wins US approval, Financial Times, Jun 7, 2021 []
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