Can Biogen Solve Alzheimer's?Sep 15, 2022
With the CPI coming in "hotter" than we'd like, we're dipping back into our long-term plays while the market goes fully volatile.
We've been really happy with the trajectory of our two primary pharma plays: Eli Lilly and Merck.
However, most pharma and biotech investors will tell you it's really important to have a broad portfolio for these sectors. Life Sciences can turn on a dime -- way more than most industries.
Therefore our analysts are choosing to revisit an interesting pick that's currently at a crossroads.
That's right, today we're initiating coverage in Biogen (BIIB).
Biogen is at a significant crossroads after a big bet on Alzheimer's treatments went south right as their primary revenue line got undercut by generic pressure.
However, the next two months are critical as important data about their second Alzheimer's medication--Lecanemab--is expected to come out right as Biogen finishes a major restructuring.
With the stock down 50% from it's high in June 2021, this moment presents a solid, higher-risk buying opportunity. Biogen's core Multiple Sclerosis medications appear to have staying power and if there is even a shred of good news about Lecanemab, the stock is set to go stratospheric.
Let's explore the risks and rewards below👇
Biogen is a brilliant innovator in Pharma. They exploded to prominence in the early 2010's and have had a great run with neurological therapies.
Specifically, they've had a lot of success treating Multiple Sclerosis.
BIIB tried to double down on that success in the past few years by using its expertise to tackle Alzheimer's. However, their potential blockbuster Alzheimer's drug, Aduhelm, is being exposed to a lot of negative outcomes and losing coverage. So Biogen has pulled all support for the drug and announced corporate restructuring.
We talked about this a little in our Eli Lilly update. There's growing drama in the Alzheimer's research space that a key piece of data was fabricated in a foundational Alzheimer's study back in the day. That study showed a single protein being responsible for causing Alzheimer's -- so a huge amount of research got devoted to treating that one protein.
In other words, there's a small chance that a large amount of Alzheimer's treatments may not actually treat Alzheimer's.
However, Eli Lilly's Alzheimer's treatment that targets the bogus protein in question looks like it has medically measurable positive outcomes for Alzheimer's patients, which is causing us to look back at Biogen.
Because, even if this protein is bogus, drugs designed around it might still demonstrate effectiveness in treating Alzheimer's.
So, getting back to Biogen's new drug, Lecanemab, only ~14% of trial participants have dropped out of testing for the drug. That's really low and a little encouraging for our pharma analysts.
Basically, these medical trials won't measure if Lecanemab is treating the bogus protein in question, they'll test whether or not someone with Alzheimer's experiences better cognitive symptoms. If there's any positive news about Lecanemab's ability to treat Alzheimer's, Biogen's stock could easily pop 15-20%.
On the flip side, if there's no good news here, Biogen's stock is low enough already that it won't get hurt as badly as it has over the past year.
In other words, this is both a fun short-term gamble and a solid 5-year buying opportunity as BIIB approaches the bottom and restructures entirely.
Long-term, Biogen is a stock that can survive even the worst-case scenario here.
While their core MS drugs are getting crushed by pressure from generic alternatives -- these revenue lines appear to have enough staying power to get Biogen through another R&D cycle.
That's enough for us to buy, hold and forget about the stock for 5 years if things go really south for the brand.
Biogen management is taking all the right steps to restructure into survival mode after all these pressures cut their valuation down, and the business itself is still in a strong position to pop off should Lecanemab post anything close to good news in this next series of trials.
We're really excited to see where they take things from here.
Price Target: $255 (26% upside)
Current Price: $202
Target Date: Q2 2023
Risk / Reward: Very High / High
Stock: Biogen ($BIIB)
Market Cap: $29B
Dividend Yield: N/A