Buy biogen inc_ cheap stock rich with positive catalysts

Biogen Inc ( NASDAQ:BIIB) is a US pharmaceutical company founded by a group of high profile biologists in 1978, several of whom went on to win nobel prizes in their field. Fast forward to this year, year-to-date in fact, and the share price has crashed by 21%. In contrast, the iShares NASDAQ Biotechnology Index (IBB) has gained 1.68% in the same time. The stock is now trading close to its 52-week low, at a discount of 26% from


its average one-year P/E multiple. Hopes of a recovery stem from a report of long term data from the organization’s core multiple sclerosis work. The document debuted at this year’s meeting of the European Committee for Treatment and Research in Multiple Sclerosis (CTRIMS), held last week. The next milestone is the publication of Biogen’s third quarter earnings report on October 21. Why Biogen Crashed Biogen lost 22% in value, wiping out $20 billion in market value on the day its second quarter earnings were released, July 24. That report highlighted deteriorating 2Q sales of key MS drugs, Tecfidera, Avonex and Tysabri. These products made up 81% of Biogen’s sales last year. No wonder full-year 2015 earnings and sales forecasts were slashed. The decline was exacerbated by disappointing Phase 1/2 trial data for its highly-anticipated Alzheimer’s drug candidate, Aducanumab, released just before the 2Q earnings. In the next two months, Biogen’s stock was disturbed by the August market selloff and September’s biotech slam. Tecfidera’s Future The corporation’s future stock performance largely depends on the sales growth of Tecfidera – world’s most prescribed oral Multiple Sclerosis treatment.

Buy biogen inc_ cheap stock rich with positive catalysts

It now faces a maturing market, competition and pricing pressures. The product has also been recently linked to cases of a deadly brain infection, PML, in patients.

The enterprise admitted during the 2Q earnings call that it sees “extremely limited” sequential patient growth for Tecfidera this year. Prescription data suggests Tecfidera’s near-term sales can exceed expectations, or at least the entity’s own conservative estimates. Merrill Lynch recently dismissed the PML risk of Tecfidera, saying new warning labels on the drug’s packaging will suffice.

It’s 3Q worldwide sales are projected to hit $919.50 million, a 4% quarter-over-quarter increase, and to regain sales growth after 2QFY16. The latest findings from Tecfidera’s Phase 3 trials data, reported at the ECTRIMS meeting, suggest it can sustainably reduce MS relapses and delay its progression in early-stage patients over 6 years of follow-up. Its long-term benefits have been found to be superior to the best-selling MS therapy, Copaxone, from Teva Pharmaceutical Industries Ltd. (ADR) ( NYSE:TEVA). Other ECTRIMS Data Another report at ECTRIMS, covered the corporation’s Phase 3 trial data on Zinbryta, a once-monthly MS drug being developed with AbbVie Inc ( NYSE:ABBV). This has proven more effective than Biogen’s interferon-based Avonex in relapsing-remitting multiple sclerosis (RRMS). It is currently under regulatory review in the US and EU. Roche Holding Ltd. (ADR) ( OTCMKTS:RHHBY) reported exceptional Phase 3 data for its MS candidate, Ocrelizumab, also at the conference. This showed promise in treating RRMS, as well as primary progressive MS – a disease type affecting up to 15% of patients, with no approved therapy in market. Roche hopes to file the twice-monthly drug for US approval by early 2016. That news triggered a bumpy session for Biogen stock. An earlier agreement with Roche gives Biogen the right to earn tiered royalties of between 13.50% and 24% on US sales of Ocrelizumab.

Buy biogen inc_ cheap stock rich with positive catalysts

Although its more convenient dosing schedule means it can reduce Tysabri’s market share. Pipeline Catalysts for $60 million upfront, Biogen recently licensed a “best-in-class” MS drug candidate from Japan’s Mitsubishi Tanabe Pharma.

The drug, dubbed MT-1303, is poised to begin Phase 3 trials in MS and Crohn’s disease, and is also being studied in inflammatory bowel disease and ulcerative colitis. Merrill Lynch said in a recent research report that MT-1303 can be “an equally effective and safer S1P receptor modulator in the treatment of RRMS” as Celgene Corporation’s ( NASDAQ:CELG) Ozanimod. Celgene acquired ozanimod in a $7.2 billion Receptos acquisition and the drug is pegged to deliver $4-6 billion in peak annual sales.

Biogen also collaborates with Roche on two blockbuster blood cancer treatments, Rituxan and Gazyva. The partnership allowed Biogen to derive $338 million in sales from the two drugs last quarter. Although this makes up a small portion of company’s overall 2Q sales, the particular sales stream is very high-margin. Later this year, Biogen also awaits Phase 3 trial data on Tysabri for an expanded indication of secondary progressive MS – affecting 30% of all MS patients. Jefferies expect positive results to increase company’s 2016 US SPMS market penetration from 12% to 25%, and provide a sales boost of more than $750 million.

Buy biogen inc_ cheap stock rich with positive catalysts

Among other pipeline catalysts is an anti-LINGO-1 MS drug, a drug type found to not only delay disease progression but also reverse it. These next-gen MS therapies can fetch $10 billion in peak sales, analysts estimate. Biogen is due to report Phase 2 trial data on the drug next year. Biogen is also due to present PRIME study data on experimental Alzheimer’s drug, aducanumab, at the annual meeting of Clinical Trials on Alzheimer’s Disease (CTAD) on November 5. Jefferies estimate a 45% success probability for aducanumab, and expects $3.6 billion in sales from the drug by 2025. Another significant late-stage product in Biogen’s pipeline treats spinal muscular atrophy and is expected to report trial results in late 2016/early 2017. The drug is pegged to deliver $1-2 billion in annual sales. 3Q Earnings Expectations As per Bloomberg, analysts on average expect Biogen to report $3.87 in per-share earnings on sales of $2.65 billion in the 3Q. Full-year EPS is projected at $15.86, better than Biogen’s own EPS expectations of $14.25-14.70. Analysts expect 2015 sales to grow 7.8% year-over-year to $10.46 billion, in-line with company’s projected sales growth rate of 6-8%, down from 14-16% prior to 2Q earnings.

RBC Capital Markets analyst Michael Yee said in a recent video-call to clients that Biogen can recover much of its share price from positive 3Q earnings, while further upside is expected through 2016 from pipeline catalysts. Biogen’s loaded pipeline also ensures long-term sales growth.

M&A Expectations Biogen may also seek growth through strategic acquisitions. The financial position of the company is strong enough to allow M&A. Last month, the company announced a $6 billion bond sale – its biggest yet. The proceeds will finance Biogen’s $5 billion share repurchase program announced earlier this year. At the current low stock price, this can lead to a 7.6% reduction in share volume and give a boost to per-share earnings and share price. Sell-Side Expectations Of 24 analysts covering Biogen, 15 rate the stock a Buy, while 9 recommend a Hold rating. The average 12-month price target on the stock is $378.80, signifying a premium of 40.7% on last close.

Buy biogen inc_ cheap stock rich with positive catalysts

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