Biogen No Longer 'Too Risky,' Atlantic Analyst Sees Massive Upside

• Biogen Inc BIIB shares have been on a downtrend since March 20, and are down 13 percent year-to-date.
• Atlantic Equities’ Steve Chesney initiated coverage of the company with an Overweight rating and a price target of $344.
• With multiple pipeline opportunities moving to late-stage and higher risk opportunities reporting proof of concept data, Biogen’s risk/reward appears attractive, Chesney stated.

Growth for Biogen’s lead multiple sclerosis [MS] asset Tecfidera appears to be stabilizing as of 3Q15, analyst Steve Chesney said. He expects mid-single digit growth through the end of this decade.

Chesney added that challenges to the remaining MS portfolio, including Avonex and Tysabri, are “well understood,” and projected about 2 percent growth for the base business through 2020.

In the report Atlantic Equities noted, “We believe investor perceptions of the BIIB pipeline as “too early-stage/too high-risk” are poised to change as some of the lower risk pipeline moves onto the market and mid-stage drugs move into late-stage clinical trials in 2016.”

There are potential approvals for the partnered MS portfolio, including Zinbryta and ocrelizumab. Chesney expects Phase III to begin for MT-1303 in ulcerative colitis, raxatrigine in pain, and aducanumab in Alzheimer’s Disease in 2016. “Our base-case assumes 50% chance of approval for this Phase III pipeline and our base case DCF indicates $344/ share.”

Provided the Phase III pipeline succeeds, there is potential for de-risked 2020 revenue CAGR of about 10 percent.

“Given the lack of proof of concept data for the other Alzheimer’s pipeline, such as E2609 (BACE inhibitor) and BAN2401 (anti-Aβ) and anti-LINGO for MS, we await the Phase II data before including these in our scenario analysis,” Chesney wrote. He added, however, that each of them potentially represent “multi-billion dollar opportunities.”