After sliding to its lowest level since 2013, Biogen Inc. (NASDAQ:BIIB) was almost forgotten by growth investors. That changed dramatically late last month when the… biotechs pipeline received a major boost.
Why did Biogen’s stock jump higher?
On September 27, Biogen along with development partner and Japanese pharmaceutical leader Eisai announced positive top-line data from their Phase 3 trial with lecanemab. The early stage investigational treatment Alzheimer’s disease reached its primary endpoint in reducing cognitive and functional decline by 27%. It also met the secondary endpoint of changing amyloid levels in the brain in a statistically significant way.
The news was greeted with intense buying activity for a stock that was down 58% from its summer 2021 peak. Shares of Biogen were up 40% on the day of the announcement in 15 times the 90-day average volume. The stunning gapper erased 10 months of losses in one day and brought new hopes for it biotech investors.
The FDA has agreed to use the Biogen/Eisai study as a confirmatory study. This means it will be used to confirm the Alzheimer’s candidate’s clinical benefit as it reviews the pair’s biological license application (BLA). The regulatory agency granted priority rating to the BLA and set an action date of January 6.
While the market awaits the FDA’s critical decision, additional data from the lecanemab study is expected to be released at the Clinical Trials on Alzheimer Congress (CTAC) conference to be held Nov. 29 to Dec. 2 in San Francisco.
Is Now a Good Time to Invest in Biogen Stocks?
Unfortunately for Biogen’s shareholders, the big rally was short-lived, but no fault of the company. Selling pressure arose because of the wider market decline causing the stock to slide back to the mid-$200 mark.
However, a second outburst came on Thursday, as Biogen took advantage of a strong day in the market and shot back towards the USD 270 level. Even so, it’s still trading below where it rose with the Phase 3 lecanemab update, giving investors a chance to pounce on a name that has momentum on its side and a potential catalyst to come in the expected January FDA decision. .
While some sell-side research firms have taken a cautious stance after the big move (and because of the FDA’s uncertainty), others see more gains ahead. More than a dozen analysts have called Biogen stock a buy since the big news, expecting the positive study result to pave the way for FDA approval. Several of the revised price targets are well into the $300.
However, there is reason to be cautious here, as Biogen is no stranger to extreme volatility. Less than two years ago, the stock went up and down in connection with another Alzheimer’s drug (aducanumab). The FDA initially offered a positive review of the drug, but declined approval days later. Marketed under the name Aduhelm, the drug was ultimately not covered by Medicare, dealing a devastating blow to the company and its investors.
Many expect that this time will be different. The data on lecanemab is very strong, which, combined with the limited options for Alzheimer’s patients, is hard to deny. More than 6 million Americans are living with Alzheimer’s disease, according to the Alzheimer’s Association. Within the next 30 years, the costs associated with Alzheimer’s disease and other dementias are expected to approach $1 trillion.
What are Biogen’s growth prospects?
The developments around lecanemab will determine where Biogen’s stock is headed in the near term. Even if it removes regulatory hurdles, getting approval from the Centers for Medicare and Medicaid Services is another hurdle. Getting FDA approval without the backing of Medicare would be a major setback.
While Biogen has become synonymous with Alzheimer’s disease in recent years, the company has a greater growth engine at hand. Led by its flagship Tecfidera product, multiple sclerosis (MS) drugs account for approximately two-thirds of Biogen’s sales. And with increasing generic competition in the MS market, the need for a non-MS blockbuster like lecanemab can’t come soon enough.
Outside of its MS and Alzheimer’s programs, Biogen owns the first approved treatment for spinal muscular atrophy. It has also achieved milestones in new treatments for depression and various neuromuscular disorders. It is ramping up its own biosimilar launches to combat the growing threat of generics. Looking to the second half of the decade, new programs in neuropsychiatry, Parkinson’s disease, lupus and stroke are expected to advance.
In the meantime, Biogen’s five different MS products will be used to build on last year’s total revenue of $7.1 billion. Whether the latest Alzheimer’s drug becomes a blockbuster or not, the company is positioned to become more diversified over time. This translates into a decreasing risk profile, which, in combination with the emerging growth prospects, makes the stock attractive here.