This company is the market leader in treating multiple sclerosis, despite a recent clinical trial setback. However, that has created a buying opportunity for this company that beat analysts’ estimates by $0.32 last quarter.
Biogen (BIIB)
From Cabot Benjamin Graham Value Investor
Biogen (BIIB) formerly Biogen Idec, is a biopharmaceutical company based in Cambridge, Massachusetts. The company discovers, develops, manufactures and delivers therapies to patients for the treatment of neurodegenerative diseases, hematologic conditions, and autoimmune disorders.
Biogen markets products, including Tecfidera, Avonex, Plegridy, Tysabri and Fampyra for multiple sclerosis (MS), Eloctate for hemophilia A and Alprolix for hemophilia B, and Fumaderm for the treatment of severe plaque psoriasis. Biogen also collaborates with Genentech to use Rituxan to treat non-Hodgkin’s lymphoma and chronic lymphocytic leukemia (CLL), and Gazyva to treat CLL and follicular lymphoma. BIIB also develops late-stage product candidates such as Aducanumab for the treatment of neurodegeneration and Nusinersen for spinal muscular atrophy.
Biogen’s stock tumbled recently due to disappointing study data for its multiple sclerosis treatment in mid-stage treatment objectives. Opicinumab, designed to repair multiple sclerosis patients’ nervous systems, missed its primary and secondary goals of improving walking and cognition and slowing disability progression. In a different trial, Opicinumab did meet its primary goal, treating patients after patients’ first attack of acute optic neuritis, according to the company’s news release. BIIB shares fell 12% to $254.61 in recent trading following the news.
Despite the setback, Biogen remains the market-share leader in treating multiple sclerosis. The company is launching new treatments that improve patient dosing, which will boost sales and profits. While multiple sclerosis is a key revenue driver for Biogen now, there are other promising drugs in the company’s pipeline, including three drugs that are in mid- and late-stage trials for Alzheimer’s disease. An effective Alzheimer’s treatment could be worth tens of billions in annual sales for Biogen within two to three years.
I expect sales and EPS (earnings per share) during the next 12 months to advance 6% and 15% respectively. Biogen’s return on equity exceeds 40%, and the current P/E (price to earnings ratio) is reasonable at 14.7. The company does not pay a dividend. BIIB warrants a Value Rating of 4 (5 is best) from Standard & Poor’s, along with a Star Rating of 4 and Quality Rating of B+. I expect BIIB to advance 42% to 359.03 within two years.
Buy at 271.24 or below.
J. Royden Ward, Cabot Benjamin Graham Value Investor, www.cabot.net, 978-745-5532, June 9, 2016