Entering text into the input field will update the search result below

Biogen Hits A Potential Home Run

Aug. 07, 2018 10:09 AM ETBiogen Inc. (BIIB)ABBV, AMGN, RHHBY7 Comments
Valuentum profile picture


  • Biogen's current product lineup is beginning to show its age, and a fresh injection of novel products may be necessary to jumpstart top-line revenue growth.
  • Spinraza is a notable step in the right direction, but we fear new gene-editing therapies may disrupt Spinraza, thus depriving Biogen an avenue of growth.
  • Biogen is committed to bringing forth a new treatment for Alzheimer's, but the goal of a viable treatment may be elusive. We're optimistic, however.
  • The company reported positive trial results at the 18-month mark on a key Alzheimer's product, but the same compound missed its primary endpoint at the 12-month mark, raising concerns on how valid the results truly are.
  • Thanks in large part to the stellar share-price jump driven by the perceived positive data read in Alzheimer's, Biogen has now cut through our $313 fair value estimate to the upside.

By Alexander J. Poulos

We closely follow the progress of the clinical pipeline of companies in the pharma/biotech sector. Unlike other less product-driven industries, the pharma/biotech sector can experience wide swings in operating performance as a result of the lapsing of patent protection on key drugs, underscoring the importance of innovation to replace aging products. Biogen (NASDAQ:BIIB) may have hit a home run in the critical field of Alzheimer's, an area of tremendous untapped need.

Biogen - A Leader in Neuroscience

Biogen is a pioneer in the area of neuroscience with a string of successful treatments, most notably in the area of Multiple Sclerosis, MS. The company's envious position in MS is being eroded, however, as a result of new product entries, including Roche's (OTCQX:RHHBY) Ocrevus that continues to slice into Biogen's once-formidable market share. We have witnessed this phenomenon numerous times; once a key product line begins to witness a credible new entrant into the field (as efficacious or more efficacious), a decline in top-line revenue ensues, directly impacting the future value of the drug.

Often, upon a cursory glance of a low price-to-earnings multiple on a pharma/biotech stock, on its face it may look like a good "bargain," especially versus the average S&P 500 company, but it's more likely the equity may be more akin to a "value trap" as the underlying business may experience a step change downward in earnings in the future due to patent expiration, something that is not "picked up" in current year or even next year's earnings. Investors should cast a cautious eye on multiples in the biotech/pharma sector as the field can undergo "boom-bust" characteristics if new and revolutionary products are not brought consistently to market to offset the decline in other key products, whether due to a new competitive entry or a patent loss.

This article was written by

Valuentum profile picture
We offer subscriptions and exclusive newsletters. Visit our website at www.valuentum.com for more information. Valuentum is an independent investment research publisher, offering premium equity reports and dividend reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information. Please read our Disclaimer that applies to all articles published on Seeking Alpha: http://www.valuentum.com/categories/20110613. Follow us on Twitter: @Valuentum

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Alexander J. Poulos is an independent contributor to Valuentum Securities.

Heathcare and biotech contributor Alexander J. Poulos does not own shares of companies mentioned in this article. Some of the companies written about in this article may be included in Valuentum's simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.