Last week, Biogen(BIIB) completed its spinoff of Bioverativ(BIVV). The Bioverativ spinoff included Biogen’s hemophilia assets and a $325 million pile of cash. What remains at Biogen is, depending on who you listen to, either poised for great growth, or struggling with it.
Barrons reports on two analysts with positive views on Biogen:
RBC Capital Markets analyst Michael Yee reiterated an outperform rating but lowered its price target to $350 a share, suggesting that investors should buy Biogen after the price adjustment, predicting the stock will climb over the next few months.
Indeed, we think investors should buy BIIB after the price adjustment for a variety of market dislocation and fundamental reasons which provides an opportunity: (1) some investors may have been waiting for after the spin to buy the stock and post the distribution as some don’t want the BIVV issuance which is a company that has a very different profile and market cap than BIIB; (2) BIIB already gave 2017 EPS guidance of $20.45-21.25 without hemophilia and it trades around 14x today; most analysts have already modeled for the change and consensus EPS is in that range so when BIIB adjusts lower towards $260, it will appear and be cheaper where it would trade around 12.4x and within 10-15% of its “no pipeline value” and not at current 14x and thus cheap compared to peer group ~14x after the adjustment; (3) we predict increasing Street bullishness on Spinraza from here; we have been positive on the Spinraza launch and Street is uncertain how this launch will go; we think BIIB will put up good launch numbers and demand metrics in 2017 and reimbursement will be good (UNH just issued positive broad reimbursement this week); thus Street will get more comfortable with this new “growth driver” and new product cycle that should potentially upside earnings (email us for our *NUSI-APP* Spinraza monthly model); indeed we wrote in our last note 1/26 (here) that our analysis says guidance may suggest upside to Spinraza numbers vs consensus expectations…
Stifel analyst Thomas Shrader calls Biogen “an easy story to follow.”
Things are moving in a positive direction for Biogen. The company finally put the Forward issue to bed with a deal that looks pretty good for Biogen – we assume a 10% royalty. While we believe it’s likely that ocrelizumab (a new, highly efficacious and easy to compliance-monitor drug) will take sales from Tysabri (expected) as well as Tecfidera (less expected) sales, there is also a significant royalty to Biogen (up to 24%). We believe a key remaining ocrelizumab question is pricing and that a low ocrelizumab price would signal Roche’s intent to try to significantly disrupt the MS market. Overall, we believe we have a pure play neurology company with no real distractions, an exciting ultra-orphan launch in progress, a game changing AD therapeutic in late stage trials and something like a direction for the remyelination program. Biogen increasingly looks like an easy story to follow.
Citi joined in the fun, upgrading Biogen stock from hold to buy, on the basis of strong expectaions for Spinraza:
“The real driver of shares over the next 12-18 [months] is uptake of Spinraza, BIIB’s new drug for SMA and our proprietary survey suggests upside to estimates” equity analyst Robyn Karnauskas wrote in a research note.
The analyst believes the Street might be underestimating the potential sales from Spinraza, which has shown positive results during clinical trials.
“We currently model Spinraza gaining 10% penetration in the US and modest uptake in ex-US and get to $390M sales in 2017 (consensus at $200-$300M),” Karnauskas said.
On the other hand, Baird analyst Brian Skorney has a neutral rating on Biogen stock:
Skorney comments, “The impressive start to the Tecfidera launch has run into a slowdown in recent quarters. While we expect this product to retain an overall impressive market share, we believe the entry of additional competitors — Glatopa from Sandoz and ocrelizumab from Roche, will keep growth muted.
Despite launching only a few weeks ago, Spinraza is already almost unanimously known by experienced treaters. Further, almost all 30 docs are eager to start prescribing the drug. Despite the potential hurdles to adoption such as intrathecal injection and the rigid induction dosing schedule, Spinraza looks set for a strong launch.”
It looks like even the negative rating recognizes the success of the Spinraza launch and its importance to Biogen. The question is whether there is continued upside in Spinraza or whether it is already approaching peak sales. Which way do you think Biogen is headed?
Disclosure: The author holds no position in any stock mentioned.
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