Is Biogen’s Research Pipeline a Reason to Invest?

Biogen Inc. (NASDAQ:BIIB) has been a laggard this year with its share price plunging 41% year-to-date against the broader market’s 26.6% gain.

The challenges for the company are not unique to it with the sector as a whole running into headwinds. The SPDR S&P Biotech ETF (NYSEARCA:XBI) has posted minimal gains over the past fiver years of just 4%, while the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) has gained about 91% over the same period.

Against this backdrop, does Biogen have the mettle to grow its pipeline and and become a more valuable investment or will it continue to languish?

How Deep is Biogen’s Portfolio and Pipeline?

Founded in 1978, Biogen has a longstanding operating history and a portfolio that reflects it, including offerings that cater to neurology, neuropsychiatry, specialized immunology, and rare diseases.

Biogen is widely known for its broad therapy options to treat multiple sclerosis, which is a chronic disease that involves the central nervous system and disrupts the flow of information within the brain and between the brain and body. The disease is chronic and requires individualized treatment throughout a patient’s life.

The multiple sclerosis portfolio includes TYSABRI and TECFIDERA, which are treatments for relapsing multiple sclerosis that enjoy a significant market presence. Biogen’s commercialized multiple sclerosis portfolio also consists of VUMERITY, AVONEX, PLEGRIDY, and FAMPYRA.

Biogen also has two multiple sclerosis treatments under its pipeline: a small molecule that is in Phase 2 and a monoclonal antibody that is in Phase 1.

Biogen’s portfolio also includes the first approved treatment for spinal muscular atrophy and two co-developed treatments to address a defining pathology of Alzheimer’s disease.

In addition, it is aggressively trying to capture a greater share of the Alzheimer’s disease treatment market. Biogen currently collaborates with Eisai, Co., Ltd., in the development of LEQEMBI, which has recently started its rollout.

While the drug enjoys full approval from the Food and Drug Administration and benefits from simpler Medicare coverage, the rollout has been slower than forecast due of a lack of demand.

Additionally, the drug was launched in lucrative markets like Japan and China. More convenient Alzheimer’s blood tests, which are expected to be ready by 2025, are expected to help the drug reach a bigger share of China’s estimated 17 million people with early-stage disease.

All was going well with the approval and rollout process until LEQEMBI hit a speed bump when the medicine’s marketing authorization was recommended refused by the European Medicines Agency. While the companies might seek re-examination, EMA has found a significant risk in the drug.

The EMA concluded that intended outcome to delay the cognitive decline of an Alzheimer’s patient does not outweigh the associated risks, such as the frequent occurrences of amyloid-related imaging abnormalities, a side effect seen in brain imaging that involves swelling and potential bleeding in the brain.

Moreover, the Committee for Medicinal Products for Human Use (CHMP) found that people with a certain form of the gene for the protein apolipoprotein E called ApoE4 showed greater risks of ARIA.

Apart from the Lecanmab monoclonal antibodies, Biogen also has two treatments in its pipeline targeted at the treatment of Alzheimer’s Disease and Dementia, a small molecule in Phase 1 and an antisense oligonucleotide in Phase 2.

What Does It All Mean For Biogen Stock?

As of the most recent quarter, Biogen’s revenues slid 2.5% year-over-year and this followed a string of fairly unimpressive quarters.

In the prior quarter, sales were essentially flat, with some good news driven by the favorable effect of its rare disease and other product portfolio but this was offset by the decline in the revenue from its core operative segment that is multiple sclerosis. This is especially important because this segment holds a 46.7% share in Biogen’s top line.

Both the top and the bottom lines have exceeded Wall Street analysts’ consensus expectations but the numbers alone aren’t overwhelming. For example, net income came in at $388.5 million, which was a sharp fall from the prior quarter’s $583.6 million figure.

Apart from seeking approvals for expansion in commercialization, management completed the acquisition of Human Immunology Biosciences, a privately held clinical-stage biotech company focused on targeted therapies for patients with severe immune-mediated diseases in the last quarter.

The acquisition adds felzartamab, a monoclonal antibody directed against CD38, a protein expressed on mature plasma cells, to Biogen’s pipeline.

BIIB Stock Price Target

Analysts have a consensus price target for BIIB of $251.70 per share, suggesting 58.3% upside from present levels.

Notably, a discounted cash flow forecast analysis largely agrees with a fair value assessment of $228 per share, or a 45% upside opportunity.

Technically, the stock sits in oversold territory right now, and that may well be enough for chartists to start getting excited about a potential upswing.

Fundamentally, the company has a relatively deep pipeline but the contraction in revenues from the multiple sclerosis front is concerning.

Moreover, the company is putting all its eggs in one basket by aggressively pushing LEQEMBI and discontinuing the commercialization and development of ADUHELM, which was another Alzheimer’s Disease-focused treatment in Biogen’s arsenal.

It has to be said that in spite of analysts optimism the share price is trading at a high multiple to future earnings growth and so while it seems to be on sale, the potential for it to go lower still exists absent a catalyst to drive a share price resurgence.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.