Biogen's (BIIB -1.44%) biggest problem a couple of years ago was similar to that of every other biotech that's been around for a while. Its older blockbusters were set to face generic competition -- and therefore, declining sales. But this biotech giant had another possibility for major revenue. And that was its new Alzheimer's drug, Aduhelm.
The situation didn't turn out as Biogen had hoped, though. Many doctors questioned the treatment's efficacy and safety, and refused to prescribe it. Biogen withdrew its regulatory request in Europe after it became clear it wouldn't win approval there. And the Centers for Medicare & Medicaid Services said it would only cover Aduhelm for those participating in a clinical trial. This all sounds pretty grim. But Biogen gave investors reason for hope during its earnings report this week. Does that mean it's finally time to buy shares? Well, there is one reason to invest in Biogen now. And there's also one reason to wait. Let's check them out.
One reason to buy now
Biogen is making some major moves to turn itself around. First, the company plans on drastically reducing the size of its Aduhelm commercial infrastructure. It's not giving up on the treatment entirely. The company will keep up "minimal resources" for patient access programs. And it will continue to fund its Embark redosing study and a post-marketing study called Envision. But it's clear Biogen is pushing this program into the background.
These efforts mean Biogen will save $500 million annually. And that can be added to the $500 million in annualized savings the company previously announced, meaning the company is looking at $1 billion that it can either save or reinvest into its pipeline or partnerships.
The company has a few other things planned, too. It will reevaluate its pipeline to focus on programs with the greatest chance of success. That means it may accelerate the development of some and end the development of others. It's working on biosimilar candidates to return that area of business to growth. And it plans on deploying cash when needed for new projects. With more than $4.7 billion in cash, the company has the resources to do this.
It's impossible to say when the stock (or the company) will reach its lowest point. But it's fair to say the situation might be there, or close -- and Biogen is launching big efforts right now to recover. Today, Biogen shares trade for about 13 times forward earnings estimates. That's down from more than 21 nearly a year ago. And this doesn't take into account the earnings potential down the road once Biogen's efforts bear fruit.
One reason to wait
Still, there are plenty of uncertainties that remain. And that's why you might want to wait before scooping up shares of this biotech stock.
One big uncertainty has to do with leadership. CEO Michel Vounatsos recently announced he would be stepping down. He will continue in his role until a replacement is found, but it will be up to the new leader to execute this plan and ensure a return to growth. It's hard to invest in a company at this sort of turning point without knowing who will be running the show.
Another uncertainty has to do with which potential products will actually drive growth at Biogen in the coming years. Biogen says it aims to keep its focus on neuroscience. That's where its expertise lies. The company and partner Eisai plan on submitting another Alzheimer's candidate -- lecanemab -- for regulatory approval by the first quarter of next year. Biogen and partner Sage Therapeutics have started a rolling submission for zuranolone as a treatment for major depressive disorder and a filing for postpartum depression should follow early next year.
All of this is positive. But it's not yet clear what the product portfolio or pipeline will look like at Biogen a year or so from now.
So, what decision should you make?
It depends on your investment style. If you're comfortable with risk and like getting in on a company well before a turnaround happens, you might want to pick up some Biogen shares now. But if you like a little more visibility before you invest, you should probably wait before betting on this former biotech superstar.