Investors who bought shares of Biogen (NASDAQ:BIIB) in 2010 or earlier and held onto them have plenty of reason to smile; Biogen has gained more than 390% since 2010. Last year, its portfolio of more than 10 drugs, including partnered therapies, generated $13.5 billion in total revenue.

Investors who are newer to the Biogen story, though, might not be as happy. The stock is down 40% from the high it reached in March 2015, and it finished last year 1.4% lower after the company scrapped development of its Alzheimer's drug aducanumab, but then reinstated the program.

A scientist examines fluid in a test tube in a laboratory.

Image source: Getty Images.

After Biogen's great gains earlier in the last decade and somewhat less impressive performance over the past year or so, investors might wonder about future potential. Are Biogen's biggest stock gains in the past? Not necessarily. Earnings, products, and valuation are three reasons why investors can be optimistic about the shares as a longer-term investment.

This year, however, the stock seems set for more volatility as investors bet on whether the Food and Drug Administration will approve aducanumab. Another looming uncertainty is whether the U.S. patent office will vote for or against a patent protecting Biogen's billion-dollar multiple sclerosis (MS) drug, Tecfidera, in the next few weeks.

Aducanumab driving stock performance

Aducanumab has pretty much taken over Biogen's stock performance since last March, when the company said the Alzheimer's treatment didn't work, ending clinical trials. The shares tumbled 33% on the news and only began to recover when Biogen reversed its decision in October. The company shocked investors when it reinstated the aducanumab program and said it would submit the drug to the FDA for approval in early 2020. Biogen brought the drug back after examining data from a broader set of patients who had access to a higher dose of the product. Higher doses reduced clinical decline (meaning it stemmed the worsening of the disease), the company said. Since that news, the stock has climbed 30%.

Once Biogen submits the drug to the FDA, the next catalyst will be when the advisory committee to the regulatory agency offers its opinion on the drug. The FDA doesn't always follow the expert panel's advice but does seriously consider it. Lastly, the final FDA decision will be the ultimate catalyst.

With all eyes focused on aducanumab, the biggest risks for Biogen are a negative opinion from the advisory committee and a rejection from the FDA. The stakes are high, considering the absence of a competitor and size of the market: Currently, there isn't an FDA-approved treatment that reduces clinical decline in Alzheimer's disease, which affects 5.8 million Americans. According to Zion Market Research, the global Alzheimer's drug market is expected to generate revenue of $5.7 billion by the end of 2024.

Patent office decision

As for Tecfidera and the patent office decision in the coming days that will either favor Biogen or Mylan, the drugmaker that hopes to bring a generic to market, the stakes are surprisingly not too high. Though SVB Leerink analyst Geoffrey Porges expects Biogen to win, he noted that impact on the shares should be limited, with much of the risk linked to the case priced in at the current level. He predicts shares would gain 5% if Biogen wins and fall 12% if the company loses the review and an appeal.

Setting aside the aducanumab case and the upcoming Tecfidera decision, let's turn to earnings. Though growth has slowed for Biogen's MS drugs as the company faces competition from European rivals Novartis, Sanofi, and Roche, MS drugs represented $2.3 billion in third-quarter revenue, a 2% increase year over year. The company surpassed analysts' earnings estimates in the past four quarters and most products are posting sales growth. Spinraza, a treatment for spinal muscular atrophy, gained 17% to $547 million in the quarter, while Biogen's biosimilar portfolio grew sales 36% to $184 million. The pipeline is reason to be positive about future drugs that may eventually compensate for declining revenue from older drugs. Including aducanumab, Biogen has five drugs in phase 3 trials and about 20 in earlier stage trials.

Another plus for Biogen is its valuation. Biogen trades at 10 times earnings, and its price-to-book value -- or the company's market value in relation to the actual value of the business -- is 3.7. Both measures are close to the lowest ever for the company. Wall Street analysts advise buying the stock, and considering the average price estimate, Biogen's shares have at least 6.7% upside.

Is Biogen's stock a buy?

From a valuation, earnings, and pipeline perspective, Biogen is a buy -- for investors who are either very short term or who are in this for the long haul. Here's why: There will be bumps along the road until the FDA issues a decision on aducanumab. Biogen expects to submit the drug early this year, then approval could take about six to 10 months. Investors who buy and sell on a day-to-day basis could benefit from fluctuations, and investors who believe in the Biogen story and hope to hold onto the shares well past the aducanumab decision likely will reap rewards from the company's sales growth over the long term -- with or without the Alzheimer's drug. But investors who want to buy shares now with the idea of selling in a few months may face a lot more risk.