Five years ago, pharmaceutical manufacturer Biogen (BIIB +1.08%) had a growing business, and Tecfidera was its star multiple sclerosis treatment. Now, competition is devastating the drug's sales, and without a replacement to make up for the decline, shares of Biogen have been falling as well.
While all hope isn't lost in the business by any means, it's been a volatile five years for investors, and I'll look at how much a $25,000 investment at the start of 2018 would be worth today, and whether you should consider buying the stock now.
Where Biogen's stock was five years ago
On the first day of trading in 2018, shares of Biogen were $321.15 per share. Investing $25,000 into the healthcare stock at the time would have allowed you to buy almost 78 shares. Last week, the stock finished at $288.04.
NASDAQ: BIIB
Key Data Points
At that price, those shares would now be worth about $22,500, for a loss of 10% over that time. During that stretch, the S&P 500 has generated returns of nearly 50% without including dividends.
Why has the stock performed so poorly?
Biogen's sales and profits struggled over the past five years. And without a dividend, there's not a whole lot of motivation for investors to buy shares of a business that isn't growing.
BIIB revenue (TTM); data by YCharts. TTM = trailing 12 months.
In 2017, Biogen's product revenue of $10.4 billion was up a modest 5.5% from the prior-year period. Top-selling multiple sclerosis drug Tecfidera brought in $4.2 billion, up 6.2%.
But in 2021, the company grouped Tecfidera's sales along with Vumerity, a similar drug, and combined they generated less than $2.4 billion, declining a whopping 40% from 2020. Losses in exclusivity have hammered Tecfidera's sales, and because it has played so much of a role in Biogen's business, total product revenue of $8.8 billion has also been on the decline.
Can Biogen turn things around?
Tecfidera has been a huge success for Biogen, and in order for things to turn around, it needs another star product to get investors excited. It thought it might have that with Aduhelm, when in 2021, after obtaining accelerated approval, the Alzheimer's treatment helped the stock soar to more than $400 a share.
But amid questions over its effectiveness, Medicare coverage for the treatment has been limited to clinical trials. Thus, any revenue the company generates from it will be insignificant.
Biogen does have hope, however, that Leqembi, which the Food and Drug Administration (FDA) also granted accelerated approval for recently, could succeed where Aduhelm failed. It has demonstrated that it can slow cognitive decline from Alzheimer's (Aduhelm didn't).
With analysts forecasting that Leqembi's peak annual sales could hit $15.2 billion, it's easy to see how just this one treatment could transform Biogen's business. It is developing the drug with Eisai, and the companies would split the profits and losses from it.
If the drug obtains full approval and patients can obtain coverage under Medicare, Biogen's stock could instantly become a hot buy. But there are still many "ifs" involved in that equation, and that's why I wouldn't buy the healthcare stock until that happens.
You might miss out on some big gains by waiting, but given Biogen's volatility, it could be just as important to ensure you limit your potential losses as well, in case things don't turn out as hoped.
