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Is Biogen Poised for a Bull Run?

health care Dec 01, 2022

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Current Price: $303

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Stock: Biogen ($BIIB)

Back in September, we completed our pharma trio by adding one of our riskier picks: Biogen. 

In the long term, Biogen is going to grow well off the back of a strengthening portfolio in depression and neuromuscular disorders. That's already proving out based on Biogen's Q3 earnings back in October. 

But in the short term, we signaled confidence that Biogen's latest Alzheimer's drug had a strong chance of proving efficacy. That would give BIIB a much faster, yet higher-risk, path to gains. 

And in the last month, two phase-three trials have concluded and sent out their data.

Biogen's Lecanemab drug looks solid enough to be a real winner upon approval next year.

The stock's up 52% since we made that pick, absolutely obliterating our initial price target. So we're back with an update--bringing way more good news than just our ongoing war against Alzheimer's.

Let's explore the risks and rewards below👇 

Lecanemab is a Winner: 

Most of our short-term thesis in our first update focused on Lecanemab.

After huge wins against Multiple Sclerosis, Biogen shifted its sights to defeating Alzheimer's.

Long story short, Biogen's first crack at defeating Alzheimer's was a real dud. But there were promising signs for their next shot, Lecanemab. And those signs bore fruit. Lecanemab demonstrated a 27% slowdown of cognitive decline in Alzheimer's patients across two clinical trials.   

Trials are tricky though--and in the second one, two patients in the trial actually died of brain hemorrhages.

That initially spooked the market a little, but if you actually look through the data, both of those patients had comorbidities or were on blood thinners and therefore far more likely to experience those issues.

The sample size here is still super small, but there's enough data to suggest Lecanemab didn't cause these. 

The only real issue with Lecanemab compared to Eli Lilly's drug is that Lecanemab does a lot more work clearing bad proteins out of the brain and not as much work at mitigating cognitive decline symptoms. We've talked this Alzheimer's issue to death (see like, 75% of the pharma analysis we've done in the last 3 months), but in the future, we want to see data that pushes that cognitive decline number up.

It's better to treat the actual symptoms of Alzheimer's than the biomarkers associated with Alzheimer's. 

Moreover, Phase 2 trial data for Biogen's NEXT Alzheimer's drug looks promising and is expected to be fully released in the next year. This is how you win in pharma, you tackle one problem with a wide variety of treatments and hope the data works out for a few of them.

Biogen's next drug treats an entirely different part of the Alzheimer's puzzle, so the fact that it's making quick work of clinical trials is a really encouraging sign just in case Lecanemab solves something that doesn't really affect Alzheimer's. 

With this foundation, Biogen can weather its MS drugs getting hammered by generics for the next few years, and really start blowing up. Because that's not the only part of the brain Biogen is gearing up to treat. 


Biogen's Other New Drugs Look Great:

Biogen also shared awesome data about their soon-to-be-approved depression treatment, Zuralone.

We'll keep this fast: despite the fact that we've been treating depression for decades, it's still a really tough disorder to manage. The best, most gentle treatments for depression take a long time (sometimes weeks) to be effective.

Zuralone is FAST--showing efficacy in 3 days for trial patients. It's the first promising novel treatment for depression we've seen in a good while, and Biogen is looking to get it approved next year now that Phase 3 trials are over and Regulatory Review is going well. 

Meanwhile--Biogen's new very specific ALS drug, Torfsen, is nearing approval as well. Torfsen treats a specific kind of ALS (a really severe genetic disease) and has shown a lot of efficacy. Approval won't change the world, but will bolster the mid-tier of Biogen's portfolio really well.  


Biogen Outlook:

While we're really excited that our short-term thesis paid off with Biogen--we couldn't be more thrilled about Biogen's long-term outlook. Their research pipeline has them taking on a wide range of genetic and neurological disorders along with strokes, Lupus, and way more. 

We're really glad we got in on the Biogen train when we did so we could capture the upside this Alzheimer's treatment is providing.

This is how you take on risk in a portfolio. Our high-profile picks in Merck and Eli Lilly grew solidly this year and gave us the runway we needed to get a little punchy in our pharma portfolio.

Make the boring picks first, and then when you're confident and have gains, try out a little risk here and there.

Biogen took a bad situation and stayed the course--cutting costs just enough to stave off disaster while they got Lecanemab off the ground. With an improving macro environment, we expect to see a lot more from this team. 

We're really excited to see where they take things from here.  

Rating: Overweight

Risk / Reward:  High / High

P/E Ratio: 15x

Market Cap: $44B

Dividend Yield: N/A