Is There Upside For Biogen Stock?

BIIB: Biogen logo
BIIB
Biogen

Biogen stock (NASDAQ: BIIB) has seen a 16% fall this year, in line with the broader S&P500 index, which is down 16%. However, in the longer term, Biogen stock, with -37% returns from levels seen in late 2017, has underperformed the S&P 500 index, up 49%. Despite the sharp decline for Biogen, we believe there is only a little room for growth, as discussed below.

This 37% fall for BIIB stock since late 2017 can primarily be attributed to 1. the company’s P/S ratio plummeting 27% to 2.7x trailing revenues currently, from 3.8x in 2017, 2. Biogen’s revenue decline of 12% to $10.8 billion over the last twelve months, compared to $12.3 billion in 2017, which more than offset 3. a significant 31% fall in its total shares outstanding. Biogen has spent $19.2 billion on share repurchases since the end of 2017, resulting in a 31% decline in its total shares outstanding. This has meant that its revenue per share metric actually grew 27% to $73.36 now, compared to $57.72 in 2017. Our dashboard on Why Biogen Stock Moved has more details.

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Biogen stock has had a volatile ride since last year. It surged from around $270 toward the end of May 2021 to over $400 levels in early June after the U.S. FDA approved Aduhelm – Biogen’s treatment for Alzheimer’s disease. However, BIIB stock has since corrected to around $200 levels currently, partly due to a much slower than anticipated rollout of Aduhelm. Aduhelm was considered the prized win for Biogen, but some experts weren’t in favor of its approval. Biogen is now conducting a post-marketing trial of Aduhelm, and the data will determine the future of the drug.

Biogen lost market exclusivity for its multiple sclerosis drug – Tecfidera. The drug garnered over $4 billion in 2017, while the sales of Fumarate, which includes Tucfidera and Vumerity, stood at just $2.4 billion in 2021. The company is also seeing a decline in Interferon and Spinraza sales, resulting in a revenue decline over recent years.

We estimate Biogen’s valuation to be $215, just 7% above its current market price of $201. BIIB stock is trading at a lower P/S multiple compared to the levels seen in 2017. This is justified in our view, given the decline in revenues and uncertainty around Aduhelm. As such, we don’t see any significant upside from its current levels in the near term. That said, any positive development from its clinical trials will likely result in higher levels for Biogen.

While BIIB stock looks like it has only a little room for growth, it is helpful to see how Biogen’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Phibro Animal Health vs. Tri Pointe Homes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Sep 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 BIIB Return 3% -16% -23%
 S&P 500 Return 1% -16% 78%
 Trefis Multi-Strategy Portfolio 0% -15% 235%

[1] Month-to-date and year-to-date as of 9/8/2022
[2] Cumulative total returns since the end of 2016

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