Drugmaker Biogen (BIIB) was briefly on top of the world. For a while, it looked like the company might have a viable cure for Alzheimer’s disease. Several recent reversals struck, however, and the latest news about its drug, Aduhelm, is definitely not helping.
The company was down around 1% in premarket trading on Friday, but rallied into Friday morning. I’m left bearish on Biogen. Aduhelm is sputtering and the company’s valuation is still running high overall.
Most of Biogen’s last year was a return to form. A massive uptick in late May to early June sent the company blasting over $400 per share. This peak didn’t last, however, as prices began a plunge that finally leveled off with 2022’s arrival.
The latest news only hurt further. A Medicare announcement noted that coverage for Aduhelm would be limited. Worse yet, it would be limited only to those who are enrolled in clinical trials.
The move faced stiff resistance from patients’ groups. However, multiple Alzheimer’s experts noted that Aduhelm’s benefits were at best “uncertain.” Worse, the safety risks involved with Aduhelm were significant enough to potentially outweigh the benefits.
Wall Street’s Take
Turning to Wall Street, Biogen has a Moderate Buy consensus rating. That’s based on 12 Buys and 13 Holds assigned in the past three months. The average Biogen price target of $246.41 implies 15.8% upside potential.
Analyst price targets range from a low of $185 per share to a high of $330 per share.
Hedge Funds Coming Back, Dividends Uncertain
The news for Biogen isn’t all bad, however. Hedge fund involvement, based on the TipRanks 13-F Tracker, is showing a comeback. Hedge funds bought another 330,000 shares last quarter, reversing a two-quarter trend of selling.
Biogen’s dividend history, however, is a bit of a puzzle. While Biogen shows no plans to issue a dividend, the last one was seen back in February 2017. That dividend was $22.23, which I doubt investors will ever see again.
Requiring Conviction, but Offering Little Support for It
There are two major problems with Biogen as I see it. One, the company already commands a pretty substantial valuation. That has dropped off in recent months.
The company lost around half its value since its peak last June. It’s still a pretty substantial buy. Just five shares would be enough to buy a decent television in a lot of places.
Granted, based on current price targets, there’s still upside potential to be had here. Shelling out around $250 for anything is likely going to be a tall order for investors, though. Especially those who aren’t carrying portfolios in the minimum six-figure range.
Inflation is frantically chewing up the bottom ranks of retail investors. That’s going to make finding investors willing to buy in on Biogen’s big-ticket price tag a tough sell.
If Biogen had a product line that could engender that kind of support, that would be a whole different matter. However, Biogen’s product line seems somewhat limited in scope, recognition, and function.
Consider its Plegridy line; this multiple sclerosis treatment comes with potential liver failure and suicidal thoughts as potential side effects.
A look at the treatment site for Tecfidera, another multiple sclerosis treatment, is worse. The front page immediately goes into a sales pitch for Vumerity, “another treatment option.”
That’s bad enough, but it gets worse. The company’s revenue has been in decline for some time. Remember Tecfidera? Sales dropped by nearly half back in 2021. Biogen’s total revenue in 2021, meanwhile, was down around 18% over the previous year.
Even the company’s flagship-to-be, Aduhelm, has serious issues connected to it. One study found that patients showed lower levels of certain “biomarkers” connected to Alzheimer’s. In turn, some patients showed a slower rate of decline.
“A slower rate of decline” is not the kind of phrase that successful marketing campaigns are built around. It’s hard to sell customers on “it will get worse at a slower rate than before.”
Concluding Views
There are some potential upsides for Biogen. The company has a full, if limited, product line. If Aduhelm can pull out of its decline and offer more positive benefit for those interested, it could be a winner. Right now, though, Aduhelm’s benefits appear limited at best and minimal at worst.
Throw that into a product line that in general seems to have limited scope and things only falter further from there. A huge valuation keeps out most investors who don’t have the strength of their convictions here. Biogen isn’t offering a lot of support to strengthen those convictions.
I’m bearish on Biogen. That’s because there doesn’t seem to be much to encourage the investor here and create value in the future. Biogen needs a winner to pull in the investors. Yet nothing in its current grasp seems to qualify.
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