Biogen (NASDAQ:BIIB), a blue chip biotech stock, has shed an unsightly 22.3% of its value over the course of the first six months of 2019, according to data from S&P Global Market Intelligence. The biotech's shares have taken a bath this year for three reasons:
- Biogen's risky bet on Alzheimer's disease went belly up earlier this year when its late-stage asset aducanumab flopped in two late-stage trials. This clinical failure wiped tens of billions in potential sales off the table.
- The biotech's multiple sclerosis franchise has stalled from a revenue generation standpoint and it's unclear whether newer drug candidates in the pipeline can pick up the slack.
- Biogen's main growth driver -- the spinal muscular atrophy therapy Spinraza (co-developed with Ionis Pharmaceuticals) is under threat from Novartis' newly approved gene therapy Zolgensma.
Biogen's sharp dip has fueled speculation that the biotech might pursue one or more tuck-in acquisitions soon. So far, though, it's only acquired the early-stage gene therapy company Nightstar Therapeutics in 2019, which isn't expected to change its outlook anytime soon.
The good news is that Biogen does have ample financial capacity for business development activities, but management has also shown little appetite for costly acquisitions during their tenure. So, it's unclear whether Biogen will ultimately make a needle-mover transaction.
Biogen's steep drop during the first half of 2019, though, may have created a compelling entry point for bargain hunters. At less than eight times next year's projected earnings, after all, Biogen is one of the cheapest large-cap biotech stocks in the market right now.
The flip side of this argument is that the company's future is rather murky in the wake of this Alzheimer's disease setback. Biogen doesn't have a particularly robust late-stage pipeline to fall back on and its management team appears content to rely on earlier-stage assets to create shareholder value. Thus, this top biotech stock may continue to struggle for the foreseeable future.