Canaccord Upgrades Biogen On Deal Opportunities, Alzheimer's Pipeline

Biogen Inc BIIB has fallen about 22 percent off a 2 1/2-year high struck in January, and a new Wall Street bull is buying the dip. 

The Rating

Canaccord Genuity analyst Sumant Kulkarni upgraded Biogen from Hold to Buy and cut the price target from $350 to $335.

The Thesis

Canaccord identifies enduring risks to Biogen’s U.S.-stabilized multiple sclerosis franchise, with potentially volatile Spinraza sales. Yet the stock’s pullback and significant discount to historical price-to-earnings multiples provide an entry point, Kulkarni said in the upgrade note. 

From there, "a fear-of-missing-out rally" in the Alzheimer’s space could catalyze a run as data emerges between the third quarter of 2018 and 2021, the analyst said. 

Kulkarni considers Biogen’s non-Alzheimer’s portfolio and long-term biosimilar opportunity undervalued, and said he expects the firm’s $37 billion in capital allocation capacity to drive value through more aggressive buybacks or deals that shorten product launch timelines.

“While BIIB's recent deals focus mainly on the longer term, we believe the potential exists for BIIB to use its financial flexibility to pursue nearer-term commercial-focused deals that investors may perceive as smart." 

Price Action

Biogen shares initially popped 1.4 percent on the upgrade but were up only 0.4 percent off the open at the time of publication Thursday afternoon. 

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