Drug maker Biogen (BIIB) looked to have the world by the tail not so long ago. It very nearly had a winner in Aduhelm, one of the first new treatments for Alzheimer’s in decades.
So how did it manage to just barely beat earnings and revenue projections? The answer to that is a big part of why I’m mildly bearish on Biogen. It’s not looking good for this company, and it’s going to need to pull out a real winner to catch attention again.
Biogen’s last 12 months in share prices give a surprising summary of the company’s news presence. The company enjoyed a nice rise in early 2021, going from around $240 to around $280 in the space of two weeks. It held fairly close to the $270 mark straight through to May, where the pattern markedly shifted.
The stock price nearly doubled, going from around $267 to over $414 in around eight days. That was about the time that Biogen managed to win approval for Aduhelm, which promised to be the company’s new flagship drug.
However, the company soon retraced its gains from that height. By October’s end, it was back in the $270 range once more. Even this long-established point couldn’t hold, however, as the company slipped below $230 in December. Now, the stock is near $222 and almost tested $210 earlier today.
The latest news is no more helpful than anything else from Biogen in the last 12 months. The company turned in its earnings report, which featured beats on both earnings and revenue. However, many points proved disappointing. Analysts were looking for $2.8 million in fourth-quarter sales for its new Aduhelm drug. Biogen could only bring forth $1 million in sales for the quarter.
Worse, the full-year forecast for 2022 proved a disappointment as well. Biogen looks to bring in between $14.25 and $16 in earnings per share for the full year, on total revenue between $9.7 billion and $10 billion. Analysts, meanwhile, projected $18.76 per share on earnings of $10.32 billion.
Wall Street’s Take
Turning to Wall Street, Biogen has a Moderate Buy consensus rating. That’s based on 14 Buys and 13 Holds assigned in the past three months. The average Biogen price target of $280.22 implies 26.1% upside potential.
Analyst price targets range from a low of $195 per share to a high of $400 per share.
A Good News, Bad News Sort of Stock
There’s actually quite a bit of reason to be bullish on Biogen. The numbers support the case surprisingly well. With Biogen currently trading around $222, it’s much closer to its lower target than it is its average or its upper target. This suggests a lot of potential upside for the company’s share price, as seen previously.
Plus, it does have an excellent portfolio of drugs. Aduhelm is indeed out and selling, just not in the quantities previously desired. The biggest hurdle for Aduhelm right now is Medicare, which isn’t paying for the drug in the amounts expected. That’s a big part of why Biogen recently slashed prices on Aduhelm, to better get it into Medicare’s coverage range and broaden the drug’s overall reach.
The problem here is that Biogen needs a winner to deliver better outcomes, not something that could be a winner if everything goes right. That’s likely part of why Biogen recently partnered with Roche on a new possible cancer drug.
Biogen and Roche have been partners in development for quite some time now, going back to work between Biogen and Genentech in 1995. One of the developments therein, Rituxan, was one of the drug industry’s biggest sellers for a long time.
That’s good news; Biogen needs a big winner, and it needs it quickly to keep investor interest. With Aduhelm sputtering, a major new cancer treatment could be exactly the required winner.
Concluding Views
Biogen needs a winner. Until it can get one, it’s hard to see how this company can get its share price back up to even the $270 level, let alone the $400 breakthrough it saw back in June. If it can get Aduhelm into wider use, with more testing or further price cuts, that could be just the stroke it needs. No one ever wants to be forced to compete on prices alone, but sometimes, that’s the best strategy. A new drug with Roche certainly wouldn’t hurt either.
However it decides to do the job, Biogen needs to do the job, and soon. It’s got some positives to it, and the current bargain-basement price may prove attractive. Regardless, without that key catalyst of a big new seller, Biogen will be little more than a gamble right now. That’s why I’m bearish on Biogen, though it’s worth keeping an eye on to see if it can generate that big new spark from somewhere in its operation.
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