For biotechnology company Biogen (BIIB), the rumor mill giveth, and the rumor mill taketh away. Wednesday was a huge day for Biogen, as news emerged that would have fundamentally changed the company. Thursday, the company came back down, as reality asserted itself. The company would have been a much better buy had the rumors actually come to pass. What remains is less encouraging. I, meanwhile, am bearish on the company, because there are a lot more potential points of failure in the wings.
Biogen kicked off 2021 with a nice, if shallow, upward climb. The company went from $245 to $280 in around two weeks. That’s not bubble territory, but it’s a nice appreciation nonetheless. The company then plateaued around that point, holding in the $260 – $280 range until June. June brought with it a massive spike that took Biogen share prices from around $270 to over $410 in about a week. The sudden gains proved only partially sustainable, as they slipped twice between June 1 and mid-July. A plateau followed the second drop, with Biogen holding the $320 – $340 range until September. Biogen started a steady downward cant that lasted until late December, when the company leveled off. A new spike kicked in thanks to the rumor mill, but now, the share price is declining once more.
The rumor mill’s boost to Biogen’s fortunes came when news emerged that Samsung BioLogics was looking to buy Biogen outright and add it to Samsung’s own roster of biotech firms. Samsung refuted that news just a day later, and Biogen’s gains from Wednesday were mostly lost.
Truthfully, the rumor seemed to have made sense. Samsung Group revealed earlier this year that Samsung planned to invest better than $200 billion in biopharmaceuticals, along with semiconductors, robotics, and other technologies.
Wall Street’s Take
Turning to Wall Street, Biogen has a Moderate Buy consensus rating. That’s based on 15 Buys and 11 Holds assigned in the past three months. The average Biogen price target of $333.39 implies 38.96% upside potential.
Analyst price targets range from a low of $209 per share to a high of $502 per share.
One Missed Rumor is a Coincidence, but There’s More Than One Afoot
It would have been great news for Biogen, and Biogen investors, if the Samsung rumors had held water. Biogen is valued at a combined total of $34.67 billion by Refinitiv data, and with Samsung looking to drop over six times what Biogen is worth on expansion projects, that likely would have meant at least some premium to get Biogen in the fold.
That rumor, however, is lost, and the gains that such a rumor would have produced are gone with it. We’re left with just Biogen by itself, and that news isn’t all that great. Biogen’s fate likely hinges right now not on what Samsung does, but rather, what Aduhelm does. Aduhelm is Biogen’s Alzheimer’s treatment, the first such treatment to emerge in the last 20 years. The drug has faced its share of controversy since emerging, including some issues with clinical trials.
Just last week, Biogen cut prices on Aduhelm in a bid to give more insurers, and patients, access to the drug. However, some reports noted that, despite the price cuts, Blue Cross Blue Shield of Massachusetts wasn’t accepting claims for the drug. Price, asserted the insurer’s Chief Medical Officer Sandhya Rao, had nothing to do with it. Rather, its objection stemmed from “…the lack of solid data on effectiveness of the drug.”
The insurer has every reason to want solid treatment for the drug available; at last report, Blue Cross Blue Shield of Massachusetts’ three million members include around 1,800 Alzheimer’s patients. A treatment for them would keep current customers in the fold, and any insurer that offers the coverage first would likely see an influx of new subscribers. So, for Blue Cross Blue Shield to not cover it suggests serious misgivings about the drug itself.
The early reports are mixed. While some trials found that “it is likely that Aduhelm provides clinical benefit,” they also found there was not “…substantial evidence of effectiveness on clinical benefit.” That likely makes insurers, as well as doctors and patients, concerned about overall impact. For a drug that was on track to be a flagship product, that’s not good news.
Biogen also has several multiple sclerosis treatments like Avonex and Plegridy, along with Tysabri, a multiple sclerosis treatment that also works on “moderate to severe Crohn’s disease.” Indeed, Biogen’s product portfolio seems very heavily focused on multiple sclerosis treatments: close to half of its listed products are in that field. There are around one million people in the U.S. who have multiple sclerosis, says the National Multiple Sclerosis Society. That means about one in 300, which doesn’t sound like a great market profile.
Worse yet, Biogen’s dividend history isn’t a positive one. The company last showed a dividend in 2017, though it was a hefty $22.23. Those looking for an income stock won’t find it here.
Biogen could have made a huge score with a working Alzheimer’s treatment, but the fact that so many seem deeply concerned about its efficacy likely won’t endear it to potential investors. Though the company is currently trading close to its lows for 2021—and at some of the lowest prices in the last five years—it’s still not good news.
Now would be a good time to buy in on Biogen. The problem is that there’s not much reason to. If Biogen can right the ship on its Alzheimer’s treatment, that will make a huge difference. Some more clinical data—and positive data—might be the key. Right now, though, Biogen’s got a fistful of multiple sclerosis treatments and not much else, which leaves me bearish overall.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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