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Analysts Digest Biogen's Alzheimer's Disappointment: 'There Isn't Much To Be Excited About'

March 22, 2019 1:30 pm
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Biogen Inc (NASDAQ:BIIB) shares plunged nearly 30 percent Thursday after, along with development partner Eisai Co., Ltd (OTC:ESALY) announced the decision to scrap two late-stage trials evaluating their Alzheimer's candidate aducanumab.

The Analysts

Mizuho Securities analyst Salim Syed downgraded Biogen from Buy to Neutral and slashed the price target from $416 to $235.

UBS analyst Carter Gould downgraded Biogen from Buy to Neutral and reduced the price target from $395 to $242.

Morgan Stanley analyst Matthew Harrison downgraded shares from Overweight to Underweight and slashed the price target from $401 to $210.

Biogen shares were sinking further under the weight of sell-side downgrades. At time of publication, shares were down 3.4 percent to $219.23.

Mizuho: We Don't See Much To Be Excited About

Syed said in a note that given the now-dead beta-amyloid hypothesis, the two remaining Alzheimer's pipeline drugs – E2609 and BAN2401 – need to be taken out of the model.

Biogen's remaining pipeline, according to the analyst, is worth a risk-adjusted $20 per share on a DCF basis, driven by late-stage assets ALK8700 for multiple sclerosis, BIIB093 for large hemispheric infraction and NSR-REP1 for choroidermia and BIIB067 for ALS.

Delving on Biogen's base pipeline, the analyst said it consists of: multiple sclerosis, which accounts for two-thirds of its revenues but is seeing slightly declining growth; and Spinraza, which has looming competition from Novartis AG (NYSE:NVS)'s gene therapy as well as the oral spinal muscular dystrophy drugs.

"The most important next catalyst is Tecfidera US litigation outcome about 12 months from now," Syed wrote in a note.

See Also: Eisai Launches Confirmatory Late-Stage Trial Of Second Alzheimer's Asset After Setback

UBS: Visibility Into Path Back To Top-line Growth Impaired

Biogen investors have in the past showed willingness to look past the threats to its base business, given the promise offered by its Alzheimer's pipeline, Gould said.

Given the base pipeline risks and the removal of Alzheimer's from the model, the analyst said investors are likely to focus intensively on Biogen escalating its M&A pace. That said, the analyst is skeptical M&A will emerge as a positive catalyst in the near term.

Notwithstanding the opportunities presented by some of the pipeline assets, particularly PSP, ALS and stroke, Biogen shares may not get the benefit of the doubt for the assets ahead of data in the wake of the Alzheimer's R&D setback and the high-risk nature of R&D in neuroscience, Gould added.

Morgan Stanley: We Don't Expect Near-Term Recovery

A near-term recovery in Biogen is ruled out, given the lack of clear near-to-midterm upside driver and downside risks related to Spinraza competition, limited pipeline news flow and Tecfidera patent risks, Morgan Stanley's Harrison said.

The analyst doesn't see any lift from operational measures such as cost controls.

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