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Biogen Stock Declines 20.9% Year to Date: Time to Sell?

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Biogen (BIIB - Free Report) stock has declined 20.9% so far this year against an increase of 28.6% for the industry. The stock has also underperformed the sector and the S&P 500 index, as seen in the chart below.

BIIB Stock Underperforms Industry, Sector & S&P 500

Zacks Investment ResearchImage Source: Zacks Investment Research

The company’s stock performance has been below most large drugmakers’ performance. Biogen's revenues declined 3.3% in the first six months of 2024. Sales of Biogen’s key multiple sclerosis (“MS”) drugs like Tecfidera and Tysabri and spinal muscular atrophy (SMA) treatment, Spinraza are declining due to competitive pressure. Biogen has also regularly faced pipeline setbacks over the years, including the failure of its first Alzheimer’s drug, Aduhelm.

However, with competition in the MS market intensifying, Biogen has successfully diversified its pipeline across neuroscience and adjacent therapeutic areas. Biogen has also strengthened its mid-to-late-stage pipeline with M&A deals, the most recent being HI-Bio. Some new drugs have the potential to drive Biogen’s long-term growth.  

Let us discuss these factors in detail to understand how to play Biogen’s stock.

Key Multiple Sclerosis Drugs and Spinraza Face Increased Competition

Sales of MS drugs and Spinraza are declining due to competitive pressure. Tecfidera revenues are declining as multiple generic versions have been launched in North America, Brazil and certain European countries. Regulatory applications seeking approval for a biosimilar referencing Tysabri have been approved in both the United States and Europe. A Tysabri biosimilar is now available in some European countries with additional launches in others and in the United States expected in 2024. Spinraza sales declined almost 2% in the first half of 2024 due to increased competitive pressure and a decrease in demand. Sales of MS drugs and Spinraza are not expected to show any significant improvement in the second half.

BIIB’s New Drug Exceeds Expectations: Is it Enough?

Amid declining demand for MS drugs and Spinraza, Biogen believes its new products, Leqembi for Alzheimer’s disease, Skyclarys for Friedreich’s ataxia and Zurzuvae for depression, have the potential to revive growth.

Biogen and partner Eisai’s Leqembi/lecanemab gained full approval from the FDA for early Alzheimer’s disease in the United States and broad reimbursement from Centers for Medicare & Medicaid Services (CMS) in July 2023. Though the Leqembi launch was slow, sales have picked up in the first half of 2024 with the positive trend expected to continue in the second half.

Biogen believes Leqembi has the potential to generate blockbuster sales as there remains a massive unmet need for Alzheimer's disease. Regulatory applications seeking approval of Leqembi are under review in Europe. Leqembi has been launched in China and Japan. A regulatory filing seeking approval for a maintenance intravenous dosing version of Leqembi is under review in the United States. At the same time, an application for the subcutaneous autoinjector is being filed on a rolling basis.

Biogen and partner Sage Therapeutics’ (SAGE - Free Report) Zurzuvae (zuranolone) was approved by the FDA to treat women with postpartum depression (PPD) in August 2023. The acquisition of Reata Pharmaceuticals in September 2023 added its newly approved rare disease drug, Skyclarys, for the treatment of Friedreich’s ataxia to Biogen’s portfolio. Skyclarys is seeing strong launch trends in the United States as well as the EU and is expected to be approved in 20 countries by the end of 2024 (approved in 12 countries outside the United States now). The Zurzuvae launch also exceeded the company’s internal expectations.

However, the new drugs are not yet generating enough sales to make up for the declining revenues of MS drugs and Spinraza.

BIIB’s Attractive Valuation & Rising Estimates

BIIB’s stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, the company shares currently trade at 12.14 on a forward 12-month basis, lower than 20.68 for the industry. The stock is also trading below its 5-year mean of 13.56.

BIIB Stock Valuation

Zacks Investment ResearchImage Source: Zacks Investment Research

The Zacks Consensus Estimate for earnings has risen from $15.62 to $16.08 per share for 2024, while for 2025, the number has declined from $17.37 to $17.26 per share over the past 30 days.

BIIB’s Estimate Movement Mixed

Zacks Investment ResearchImage Source: Zacks Investment Research

Conclusion

Other than competitive pressure on MS drugs and Spinraza, Biogen’s other troubles include the FDA approval of Eli Lilly’s (LLY - Free Report) Alzheimer’s drug Kisunla (donanemab) in July 2024, which will pose significant competition to Leqembi. In July, the Committee for Medicinal Products for Human Use (“CHMP”) of the European Medicines Agency gave a negative opinion regarding the marketing approval of Leqembi in the European Union.  While Eisai will request a re-examination of the opinion, this setback will delay approval in the EU. Biogen also expects costs to rise in the second half of the year.

However, despite the expectation of higher operating costs in the second half, Biogen raised its operating income and earnings guidance for the year on the second-quarter conference call. The company also raised its top-line expectations for 2024. Its cost-saving initiatives under its “Fit for Growth” program and savings from the R&D portfolio prioritization efforts are pulling up profits.

Biogen is definitely not the best large-cap drugmaker to have in one’s portfolio. However, consistently rising earnings estimates clearly highlight analysts’ optimistic outlook for further growth. The stock has also been consistently trading above its 50-day and 200-day moving averages since the end of July.

Biogen’s reasonable valuation, an improving pipeline and better sales prospects of new drugs are good enough reasons for those who own this Zacks Rank #3 (Hold) stock to stay invested for now and not sell their shares immediately. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Though there is still uncertainty about Biogen’s sales and profits improving significantly, investors can hold the stock given the potential of its new drugs.


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