Shares of Biogen (NASDAQ: BIIB) have tanked 9.1% this year following the biotechnology company’s failed bet on its Alzheimer’s disease drug, Aduhelm. The company is expected to announce its Q2 results on July 20.
Robert W. Baird analyst Brian Skorney expects Biogen to deliver an “in-line” quarter ahead of its Q2 earnings and remained sidelined on the stock with a Hold rating. The analyst raised some key concerns for the stock in his research report.
Skorney expects BIIB to generate revenues of $2.54 billion versus Street estimates of $2.48 billion in Q2. The analyst expects the company to report earnings of $4.23 per share, above the consensus estimate of $4.09 per share.
Let us look at some of the analyst’s key concerns regarding Biogen.
Biogen’s Search for New CEO Continues
Biogen had announced in its Q1 press release that it was going to search for a new CEO and that Michel Vounatsos would continue to serve as CEO and on Biogen’s Board of Directors until that time. As Biogen’s search still continues, Skorney expects a “progress update in the upcoming earnings release, albeit this is likely to be a qualitative characterization of the ‘high quality’ candidates they are screening.”
Is Biogen’s Alzheimer’s Story at Risk?
Biogen announced in its Q1 press release this year that it was pulling the plug on its Alzheimer’s disease drug, Aduhelm, which had received approval from the U.S. Food and Drug Administration (FDA) last year. The company stated that according to the National Coverage Decision (NCD) from the Centers for Medicare and Medicaid Services (CMS), patients with Medicare will be reimbursed only if they are a part of an “approved clinical trial.”
BIIB stated that this decision was likely to “reduce future demand for ADUHELM to a minimal level.” As a result, in Q1, the company wrote off around $275 million of inventory related to Aduhelm.
Analyst Skorney stated that “with the Aduhelm fallout having largely run its course, we continue to view the readout of the lecanemab pivotal study in the back half of the year as either a revitalization or dying breath of the beta amyloid story for Biogen.”
The analyst was referring to the U.S. FDA’s decision to approve a Biologics License Application (BLA) for accelerated approval of lecanemab, an investigational anti-amyloid beta (Aβ) antibody for the treatment of mild cognitive impairment (MCI) due to Alzheimer’s disease (AD).
Currently, the Clarity AD Phase 3 clinical study for lecanemab is underway, and the readout of this primary endpoint data is likely to occur later this year.
Competitive Pressures Weighing on Biogen’s Spinraza
Biogen’s Spinraza is used for the treatment of Spinal Muscular Atrophy (SMA). However, revenues from this drug declined by 9.2% year-over-year in Q1. Biogen stated in its quarterly filing that this fall in revenues was “primarily due to a decrease in demand as a result of increased competition in certain established markets, particularly Germany.”
Skorney pointed out that while the “worst of fears is over at this point, but still expect moderate competitive pressure.”
Biogen’s Loss of Exclusivity for Tecfidera Is Another Concern
Analyst Skorney also remains concerned about the loss of exclusivity regarding Biogen’s drug, Tecfidera, used in the treatment of Multiple Sclerosis (MS). Two court cases have deemed the patent regarding the exclusivity of the drug to be invalid.
The analyst pointed out that the company’s management also revealed that the exclusivity of the drug could be lost in the European region in the first half of this year. Skorney added, “The European portion of sales is ~10% of the total top-line, meaning the outcome here will be material for shares.”
Wall Street’s Take
The analyst has a price target of $224 on the stock, implying an upside potential of 4.5% at current levels.
Other Wall Street analysts are cautiously optimistic about Biogen, with a Moderate Buy consensus rating based on 11 Buys and eight Holds. The average Biogen price target of $247.26 implies an upside potential of 11.7% at current levels.
Concluding Thoughts
It remains to be seen how Biogen addresses these key concerns over the long term.
However, investor sentiment regarding the stock is very positive, as indicated by the Crowd Wisdom tool on TipRanks. The tool indicates that among the top performing portfolios on TipRanks, 19.4% have increased their holding of the stock in the past 30 days.
