If there is one group that can produce stock gains regardless of the daily market activities, that would be biotechnology and emerging pharmaceuticals. Coming up with a new approach or new way to treat cancers and other major diseases probably doesn’t need a strong stock market to produce major interest. Alzheimer’s disease is one of the most debilitating diseases of the modern era, and currently there are no cures to chase — no real approved drugs on the market that make a difference on the progression of Alzheimer’s.
Biogen Inc. (NASDAQ: BIIB) has an on-again off-again history with its efforts to treat Alzheimer’s. The biotech giant is set to report earnings this week, and the view of the company’s Alzheimer’s study may be only a portion of the consideration for the coming week and the weeks ahead.
According to Canaccord Genuity, Biogen may be the best current bet of any major company that has at least a chance of getting further toward an FDA approval around Alzheimer’s. Monday’s top analyst upgrades and downgrades included Biogen, with Canaccord Genuity upgrading it to Buy from Hold and raising its target price to $360 from $305.
While Sumant Kulkarni sees Biogen’s aducanumab facing a regulatory saga with much public skepticism, he also sees much potential upside heading into that process. The analyst was surprised by Biogen’s sudden revival of aducanumab last October, and he retains a healthy degree of skepticism around the trial data that were presented in December. Despite that skepticism, there is still believed to be a “decent short at FDA approval” for aducanumab. Kulkarni believes that any approval is not baked into the shares now.
The report comes with some potential pitfalls, including early patent challenges in other drugs, but the potential fear-of-missing-out on the part of investors chasing an Alzheimer’s approval is massive. Biogen is also only valued at roughly nine times the expected 2020 earnings. Biogen is also said to have approximately $50 billion of “financial flexibility through 2024” that would allow the company to make acquisitions or have other efforts. And Kulkarni believes that investors are now undervaluing the company’s core pipeline outside of aducanumab.
The largest driver of the target hike and upgrade comes from the chances of aducanumab getting FDA approval now at 50%m up from a prior chance of just 20%. Kulkarni’s view is that 2020 will see many events around the filing of and the acceptance of the filing (or not) for aducanumab by the FDA. That would then come with Advisory Committee meetings, votes and an ultimate FDA action date.
With a projected cost of roughly $8,700 per year in the United States and a later launch at a 20% discount in European Union and Japan, the analyst’s view is that aducanumab could see as much as $9.9 billion in revenues per year by 2030. That said, other companies, both large and small, are also still chasing their own ambitions of coming up with an approvable treatment for such a debilitating disease like Alzheimer’s. That means any approvals or related news from any of those programs could also cause volatility for Biogen shares.
Again, this analyst upgrade is not a prediction about Biogen’s upcoming earnings. Investors should also never just use any single analyst report as a sole basis to buy or sell a stock. Remember that many biotech companies and many of the world’s top pharmaceutical companies have bet and lost countless billions of dollars with nothing to show after failing in their quest to treat Alzheimer’s disease.
Biogen shares opened flat at $278.14, but after a lack of news around the coronavirus hurting stocks, its shares were last seen up 0.85% at $280.50 with just over two hours left in Monday’s trading session. Biogen has a 52-week range of $215.78 to $338.87, and its consensus analyst target price from Refinitiv was $304.57. Biogen’s market cap is currently just above $50 billion, and its annualized revenues are around $14 billion.
Any drug approval to treat Alzheimer’s, even a less than universal approval, would be in line for the blockbuster status of more than $1 billion in annual sales, even if it only is able to delay or minimize the onset stages of the disease.
According to Alzheimer’s News Today, Alzheimer’s is growing, and only around one in four people with the disease even get diagnosed. The group estimates that approximately 44 million people worldwide are living with Alzheimer’s disease (or related form of dementia) and roughly 5.5 million people in the United States alone have the disease.
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