Summary
- Biogen is the neuroscience market leader and continues making investments to maintain that lead.
- Neurological disease treatments represent the largest unmet need in the medical industry with number of patients growing ever day.
- Compared to other large pharma/biotech companies, Biogen invests and researches for the long term. Investors in the company should do the same.
Intro
Biotech stocks are notoriously volatile with traders' reactions bordering on anything from manic-depression to irrational exuberance based on the latest update for any one drug no matter how small. Biogen's stock fits that mold, down about ~25% in the last 5 years, up 700% in the 5 years prior, and flat for a decade earlier with extreme and frequent swings along the way. Given Biogen's stock price history, owning Biogen for safety requires some explanation, and to be clear, it's a very different type of safety than you would get in a US Treasury Bond. Compounded annually, BIIB has delivered a 9% annualized return over the last 20 years, outperforming the S&P 500 in an uncorrelated fashion. Let's dive in to see why that trend is likely to continue, and why the 5 year sell-off sets up an excellent opportunity to start building a long-term buy-and-hold position.
The Market Leader in Neuroscience
As breakthroughs in medical science allow people to live longer than ever, a greater portion of the population will have to contend with neurological problems that often occur later in life. Medical professionals and researchers have made amazing progress in an increasingly crowded oncology space over the last two decades as they rushed to fight cancer in all its forms. They've made significant progress fighting infectious diseases and viruses, cardiovascular disease, and diseases in many other areas, but neuroscience has proven to be an especially difficult treatment area. As a result, big pharma has pulled R&D dollars from neuroscience budgets in pursuit of less risky profits, despite the overwhelming need. Meanwhile, Biogen has doubled down on neurology and is now the leader in terms of drug pipeline setting itself up as a research powerhouse for what could become the most important medical research space over the next decade or two.
Source: Biopharmadive
Roche's CEO stated "We think neuroscience has the potential to be in the '20s what oncology has been in the last decade", and from the look of their pipeline, the company is putting its money where its mouth is. If Roche (OTCQX:RHHBY) is correct, this bodes very well for Biogen as the most experienced biotech/pharma player in the space. As you can see below, Biogen has spent more than $10B over the last 5 years (5% of its market cap/year) in R&D with the vast majority of that going to neuroscience research.
