Biogen (NASDAQ:BIIB) hasn't been the world's most reliable biotech stock over the past five years. Major setbacks in its Alzheimer's disease drug-development pipeline have crimped growth, and the withdrawal from the market of its multiple sclerosis drug Zinbryta caused potential investors to be skeptical. 

Indeed, investing in Biogen in 2016 and selling today would have meant a loss of 16.6%. The company offers no dividends, nor does it plan to. Unlike other biotech companies of a similar size, Biogen doesn't develop drugs in lucrative disease areas -- think oncology, hypertension, or arthritis. As a result, the company has few prospects of developing a blockbuster drug for a mass market.

Is there a case to be made for a long-term investment in Biogen, given that its stock's recent performance has been decidedly poor? 

A scientist looking down a microscope.

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Biogen's rally is already under way

In contrast to its five-year performance, Biogen's growth over the last three years has been a formidable 19.6%. Most of this growth occurred during two sharp recoveries after crashes in 2018 and 2019. The first was prompted by the withdrawal of Zinbryta on concerns about its ratio of risk to benefits; the second came when Biogen's Alzheimer's disease drug, aducanumab, saw unfavorable clinical trial results. 

Biogen's three-year stock price.

Image source: YCharts

Biogen has responded to these two setbacks cautiously. Zinbryta, so far, has remained off the market, and the company appears to have no future plans to bring it back or to re-market it for a new indication. As for the Alzheimer's drug candidate in phase 3 clinical trials, the company accepted the negative results by halting development and claiming that it would stop seeking FDA approval for the drug. 

Two months later, however -- on the basis of positive and widespread anecdotal evidence from the families of patients enrolled as the drug's clinical trial cohort -- Biogen commissioned a secondary review of its trial data. In the course of this review, the drug was found to be beneficial, contradicting the first round of unsatisfactory results. 

Now, Biogen has returned to seeking approval for the drug -- an uncommon story in the annals of pharmaceutical industry history. As of March, Biogen has resumed clinical trials to study redosing of the drug, and it has also committed to providing it to prior enrollees who found it beneficial. These are both very positive signs which indicate that the trial's initial poor results were either anomalous or analyzed incompletely.

If Biogen succeeds in turning around its fortunes with aducanumab, its stock and earnings will get durable boosts. With a return on equity of almost 45% and a profit margin of 41%, it's clear that Biogen's fundamentals are still strong. Furthermore, Biogen's pipeline is packed with programs at every phase of the clinical trial process. With six phase 3 programs and a dozen phase 2 programs in 16 different disease areas, the company's efforts are both highly diversified and highly advanced. This decreases the chance that a competitor will be able to capture a substantial portion of Biogen's market share.

Expanding into gene therapy may drive future growth

Biogen is also making major inroads on its gene therapy collaboration with Sangamo Therapeutics(NASDAQ:SGMO) begun in April. To initiate the collaboration, Biogen purchased $225 million in new Sangamo stock, paid it $125 million for technology licensing, and agreed to pay up to $2.37 billion in royalties as well as milestone payments. In the collaboration, Sangamo will help Biogen develop gene therapies for disease areas like Parkinson's disease, Alzheimer's disease, and neuromuscular diseases, all of which are within Biogen's area of greatest research and development competence.

While the new collaboration hasn't had the time to deliver any new drug candidates for clinical trials, preclinical work is already under way, and a few years' time will likely mean several new phase 1 programs in play for Biogen. More importantly, the collaboration with Sangamo is a foot in the door for entry into the gene therapy space, which Biogen has avoided up to this point. As smaller companies in the biotech sector continue to develop more effective technologies and methodologies for gene therapies, it's likely that Biogen will be interested in making acquisitions to drive a long-term strategic advantage.

How to invest in Biogen 

At present, Biogen's stock appears poised to continue to grow. Current holders of Biogen should understand that they'll earn more by waiting for a few more years for the company's drug development efforts to pay off. The stock will probably break out of its horizontal movement relatively soon, perhaps as a result of its technology development pursuant to discovering a COVID-19 vaccine, perhaps because of its pipeline expansions and prospective FDA approval for aducanumab. This means that there's no time like the present to invest.