Biogen Downgraded To Hold At Jefferies, Citing Valuation

Shares of Biogen Inc BIIB have surged 39 percent since late-June, driven by “continued stabilization of their MS franchise, a positive interim analysis for pipeline drug nusinersen, and M&A speculation,” Jefferies’ Brian Abrahams said in a report. He downgraded the rating on the company to Hold, while raising the price target to $323.

Risk Reward Balance

Analyst Abrahams commented that the stock valuation now more appropriately reflects some of the attractive fundamentals, which include:

• Future cash flow potential of Biogen’s MS products, estimated at $4-$5 billion annually over the next 10 years
• Nusinersen opportunity, estimated at an out-year revenue potential of more than $1.5 billion, with a 90 percent probability of success
• Aducanumab opportunity, estimated at an out-year revenue potential of more than $2.0 billion, with a 60 percent probability of success
• Opportunity for increasing operating leverage
• Neuroscience R&D depth

“We believe this is balanced by some of the potential headwinds, including known MS franchise challenges (diminishing pricing power, less organic growth, expected ocrelizumab and ozanimod competition), outstanding IP risks, and an undiversified, higher-risk pipeline,” Abrahams wrote.

The analyst added, “We continue to see BIIB as a potential acquisition target and would remain holders of shares into a potential takeout and other potentially positive near-term events, but at current levels we believe the upside is less compelling for driving new investment into the name.”

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