Summary
- Biogen has had a fluctuating share price, primarily tied to aducanumab.
- The firm is profitable, and has a strong balance sheet, but the stock is not without risks.
- It does trade at a 46% discount to fair value.
Biogen Inc. (BIIB) has had a roller-coaster ride on its share price, and there are concerns regarding approval of its controversial aducanumab treatment for Alzheimer's disease. Despite these factors, I believe that Biogen is an undervalued opportunity in the biotechnology sector.
That Biogen has experienced share price volatility is clear from the fact that its 52-week low was $215.77 and its 52-week high was $374.99. The degree of fluctuation is clear from the chart below.
At close of market on 08/19/2020, Biogen Inc. traded at $279.98 per share. Chart generated by FinViz.
However, the perceived volatility is not quite as pronounced as the above may indicate - the volatility range for this period is 2.09-2.34% and the stock has a beta of 0.55. For a biotech stock, then, Biogen is actually relatively stable - especially taking into account the impact of COVID-19 on the markets this year.
The causes of such fluctuations are tied to headlines, as is usually the case. Biogen had trouble last year regarding aducanumab, when it announced in March 2019 that it would discontinue testing for the Alzheimer's treatment, for which it has partnered with Japanese pharmaceutical firm Eisai (OTCPK:ESALY). A futility analysis concluded that the studies would not meet the primary endpoints. Mr. Market's reaction was swift and brutal - the share price took a 28.2% hit on 03/21/2019.
However, in October aducanumab was back in play again. Higher dosages seemed to improve efficacy, and Mr. Market reacted again (albeit positively) by pushing the share price up 34%. Recently, the stock spiked 9% on the news earlier this month that the FDA had granted priority review status to aducanumab, with an action date of 03/07/2021 set by the agency.
Biogen has received priority review for aducanumab, its Alzheimer's disease treatment. Image provided by Fierce Pharma.
Hopes in this direction were undermined, though, on 08/19/2020 when news that the FDA had rejected two medicines that were presumed to clear without hindrance. Specifically, the FDA rejected an application for filgotinib, a treatment for rheumatoid arthritis developed by a partnership between Galapagos NV (GLPG) and Gilead Sciences (GILD).
