BMO: Biogen's Risks Quickly Becoming Priced In, But This May Not Be The Bottom

BMO Capital Markets isn't calling the bottom on Biogen Inc BIIB despite the risk to its MS franchise and Spinraza getting priced in.

With Biogen's MS franchise thesis playing out, BMO upgraded shares of the company from Market Perform to Outperform and lowered its price target from $382 to $381. 

Analyst Ian Somaiya said his upgrade is based on expectations for investor focus to once again shift to Biogen's Alzheimer's treatment candidate aducanumab, with positive updates at the Clinical Trials On Alzheimer's Disease conference, scheduled for Nov. 1-4, and BAN2401 data, due in the fourth quarter of 2017, supporting positive Phase 3 data. Aducanumab may succeed where other amyloid beta-targeting drugs have failed, Somaiya said in a Tuesday note. (See Somaiya's track record here.) 

Third-quarter revenues exceeded expectations, thanks to Spinraza sales, excluding the U.S., the analyst said. BMO projects a rapid uptake of Spinraza outside of the U.S. and maintenance dosing in the U.S. to drive growth in 2018.

The Street nmustaccount for the potential launch of AveXis Inc AVXS's AVXS-101 in 2018, Somaiya said. BMO projects below-consensus MS franchise sales, factoring in the launch of Celgene Corporation CELG's ozanimod and generic Gilenya.

Amendments to aducanumab-associated deals with Eisai and Neurimmune signal confidence in the Phase 3 outcome, Somaiya said. 

"We have adjusted our model to take into account higher share of aducanumab profits in the U.S. and Europe and partner Eisai sharing 45 percent of costs starting in 2019 as well as lower royalties to Neurimmune." 

This, according to BMO, offsets lower MS sales, in particular Tecfidera, and prompted its price target reduction.

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