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Positive Surprise In SMA For Biogen: Taking A Starter Position In The Stock

|Includes: Biogen Inc. (BIIB), IONS

It's always nice when a commercially significant upside event happens to a stock you want to find a reason to buy, and it happens at a price below where you either last sold it or, in my case, last wrote about it. This has now happened for both of the above criteria with Biogen (NASDAQ:BIIB), one of the classier companies in the pharmaceutical industry that's had some issues the past year or two.

The news is as follows and is very good:

Biogen and Ionis Pharmaceuticals Announce SPINRAZA (nusinersen) Meets Primary Endpoint at Interim Analysis of Phase 3 CHERISH Study in Later-Onset Spinal Muscular Atrophy

When interim analyses lead to a recommendation to stop a clinical trial early, you usually are looking at a real winner, not a marginal situation. The sub-header looks accurate:

Second Positive Phase 3 Study Provides Further Evidence of SPINRAZA's Efficacy and Favorable Safety Profile -

- Results Were Statistically Significant and Clinically Meaningful

The P value had too many zeroes (was extremely statistically significant) to count.

BIIB has financed the development by Ionis (NASDAQ:IONS) of nusinersen. Not counting any further milestone payments to IONS, BIIB is on the hook for up to mid-teens royalties. I seem to recall that IONS has no co-promotion rights.

This study validates the Phase 3 studies in Type 1 SMA and makes Spinraza a potential multi-billion dollar product.

Some technical details and discussion of gene therapy, including the candidate from AveXis (NASDAQ:AVXS) are found in an April 2015 review article titled Spinal Muscular Atrophy Therapeutics: Where do we Stand?. There are some threats to this drug, but for now, I'm not panicking.

This positive data, coming in not on the expected conclusion of the CHERISH study, increases my fair value estimate of BIIB and provides a psychological boost as well. It also has to increase its value to a potential acquirer. Thus I have added, again, a position in BIIB in the low $290s Monday morning. BIIB has treated me well with several swing trades since 2014 (the first was above $330 in 2014), with several winning trades and one loser. This may be more of a buy-and-hold trade, though. I bought BIIB today lower than the highest price in it in 2013, when it earned under $8/share. Now it's looking at $20 for this year. Sometimes P/E compression runs its course and the path of least resistance turns upward.

Note: I must have mishandled the publishing of this, as it ended up in my drafts rather than published. I meant to publish it Monday. But here it is as written. BIIB closed just about where it was trading when I wrote this.

Disclosure: I am/we are long BIIB.

Additional disclosure: Not investment advice. I am not an investment adviser.