Biogen (BIIB 4.56%) offered investors a huge win last year when regulators approved Aduhelm -- its controversial Alzheimer's treatment. The stock soared 52% in just a few days.
But the road hasn't been easy since. Many neurologists have refused to prescribe the medication. And the Centers for Medicare and Medicaid Services recently said it would limit coverage of the medication to those patients in clinical trials. Biogen shares have slipped more than 45% from that high point reached last June.
To make matters worse, Biogen faces declines in its top-selling medications. The reason? Generic competition is eating away at market share. In this context, is Biogen an absolute sell? Maybe not. There are often a few ways to look at a picture. And here, there are two reasons to buy Biogen stock now -- and one reason to sell.
Image source: Getty Images.
Reason to buy: The pipeline
Biogen has reached a turning point. The bad news is that revenue from blockbuster multiple sclerosis drug Tecfidera and blockbuster cancer treatment Rituxan is on the decline. In fact, the company said these decreases are likely to reduce its gross margin percentage this year compared to 2021.
So, we shouldn't expect impressive revenue gains from Biogen in the near term. But now could be a time to get in on the Biogen story for the long term. Biogen has nearly 30 candidates in the pipeline in various neuroscience areas. And nine of them are in phase 3 studies. If even a few of those late-stage programs make it to commercialization, Biogen could be looking at significant revenue drivers in the coming years.
One phase 3 program to note is Alzheimer's candidate lecanemab. Like Aduhelm, it's an antibody treatment and targets amyloid plaques in the brain. But clinical studies have demonstrated fewer cases of a side effect known as amyloid-related imaging abnormalities (ARIA). Lecanemab has shown a less than 10% incidence of ARIA-E or brain swelling. That compares to more than 35% for Aduhelm. The U.S. Food and Drug Administration (FDA) has granted lecanemab Fast Track and Breakthrough Therapy status. Another promising phase 3 program is zuranolone for depressive disorders. The latest trial data showed efficacy in 75% of patients after a two-week treatment course.
Reason to buy: Valuation
Biogen is trading at less than 15 times forward earnings estimates. This is not its lowest. But it's come down from last year's peak of more than 20.
BIIB PE Ratio (Forward) data by YCharts
The stock has traded at around today's level from time to time over the past few years. But it only traded below this level for a sustained period of time prior to 2014.
I don't expect Biogen to immediately climb. The company has even forecasted a decrease in revenue this year. It predicts $9.7 billion to $10 billion in revenue. That's compared to more than $10 billion last year. But if you believe in Biogen's pipeline and ability to bring some of these candidates to market in the coming years, today's price looks like a bargain.
Reason to sell: Aduhelm risk
Biogen and investors were counting on Aduhelm as the company's new revenue and profit driver. And the Alzheimer's treatment did indeed win FDA approval. But the path for this treatment hasn't been smooth -- and the road ahead looks rough too.
Biogen must conduct a confirmatory trial to validate data from its phase 3 trial. It aims to start patient screening for the trial in May. But this trial will take about four years to complete. Meanwhile, many doctors hesitate to start their patients on Aduhelm. In fact, a group of Alzheimer's experts even started a petition in December for the withdrawal of the drug.
Sales of Aduhelm have been far from stellar. The treatment brought in $3 million last year -- from the drug's June approval through the end of December. And recently, Biogen cut the wholesale price of Aduhelm by 50% to $28,200 -- that's for a full-year treatment.
Right now, Aduhelm is available in the U.S. But the European Medicines Agency didn't approve the drug. And Japan is asking for more data before making a decision.
Considering all of this, I'm not optimistic about Aduhelm delivering major revenue any time soon. And more negative news from healthcare providers, payors, or patients treated with the drug could weigh on Biogen stock now and well into the future.
Should you buy or sell?
This depends on your investment horizon. Biogen likely will bring new products to market in the coming years -- and eventually, there may be a blockbuster or two to offer revenue and share performance a big boost. So, if you're a very long-term investor, you may want to consider shares of this biotech company.
If you've held Biogen stock for a while and don't mind waiting around, you also may want to stay around for the next few chapters in the Biogen story. But if you're not comfortable waiting through periods of uncertainty and revenue troubles -- and the Aduhelm situation worries you -- now may be time to sell.
