What happened
Shares of Biogen (BIIB 2.93%) shot up as much as 37.1% this week, according to data from S&P Global Market Intelligence. The large-cap drugmaker with a market cap of $39 billion announced that its new Alzheimer's drug it developed in a partnership with Eisai showed tremendous promise in a clinical trial. As of 12:42 p.m. ET on Friday, shares of Biogen were up 35.5% this week.
So what
On Sept. 27, Biogen put out an official press release stating that its new drug, named lecanemab, showed promise in slowing the progress of the brain-damaging disease Alzheimer's versus a placebo in clinical trials. The drug targets a plaque that builds up in the brain and is thought to cause the disease. Patients who took lecanemab saw a reduction in this plaque by 27%, on average.
Investors immediately got bullish on Biogen stock after the news was announced. Why? Because Alzheimer's has been such a hard disease to build treatments for, meaning that this new drug could have a ton of demand once it becomes commercially available. With an estimated 6 million Americans affected by Alzheimer's, and given how devastating the effects can be, Biogen will likely be able to charge a lot of money for this drug if it can actually slow down the spread.
Now what
Even after this stock pop, Biogen stock trades at a reasonable valuation. Its trailing price-to-earnings (P/E) ratio is 19, which is right around the market average. The company has a wide portfolio of different drugs serving different diseases like multiple sclerosis, muscular atrophy, and non-Hodgkin's lymphoma. This diversification can help a drugmaker not rely on the success of just one drug to drive its business. On top of this reasonable P/E, this doesn't include any future earnings that come from this new Alzheimer's drug, which could drive earnings growth for many years if or when it eventually comes out to the public.
NASDAQ: BIIB
Key Data Points
If you are interested in owning pharmaceutical stocks and think this new Alzheimer's drug has promise, now could be the time to buy shares of Biogen. Don't be afraid to buy just because the stock is already up 35% this week.
