Biogen (BIIB) suffered a significant setback on Tuesday, after the markets closed. Medicare announced that it would only cover the cost of Aduhelm for those enrolled in clinical trials.
This resulted in the stock losing approximately 9% of its value in pre-market trading. While this represents a significant setback in the near term, I do not think this will be a company-defining setback years from now.
On January 4, Biogen announced — along with Ionis Pharmaceuticals — that Biogen has exercised its option to obtain a worldwide exclusive royalty-bearing license from Ionis to develop and commercialize BIIB115/ION306, a second ASO molecule to treat Spinal Muscular Atrophy.
Spinraza, the first ASO molecule Biogen licensed from Ionis, accounted for almost 20% of Biogen’s total revenue in 2020. I see this as a potentially more significant profit driver than Aduhelm.
This second molecule will also help Biogen not only capture market share that has been lost to other SMA treatments that have entered the market over the past four/five years, but it should also help get some of the estimated 49,000 patients who suffer from SMA a form of treatment whose needs are currently unmet.
In other words, this should help Biogen capture a larger slice of a larger pie, not just steal market share from its competitors in the SMA space.
Because of the other projects in the works, I remain bullish on this stock.
Recent Results
Biogen has brought in revenues of $8.96 billion over the last 12 months, with a net income of $2.1 billion.
The company reported third-quarter 2021 earnings of $4.77 per share, beating analyst estimates of $4.09 per share by $0.68. It has also reported $15.79 in earnings per share for the first three quarters of 2021, beating analyst estimates of $14.32 for that period.
The company has a solid set of financial statements. BIIB has a current ratio of 1.7, so it has enough current assets on hand to pay its bills for the next year and a half at its current burn rate.
When I calculated the stock’s intrinsic value by modeling discounted cash flows, I pegged it at $337.12.
This stock has quite a lot of room to increase in share price before the market value catches up with the stock’s intrinsic value.
Wall Street’s Take
BIIB stock earns a Moderate Buy rating from analysts, based on 15 Buys and 13 Holds assigned over the past three months.
The average Biogen price target of $300.63 suggests 27% upside potential.
Conclusion
Based on the intrinsic value of this stock, the Wall Street analyst’s estimates, blogger estimates covering Biogen, I am bullish on this stock.
Biogen’s decision to license another ASO therapy from Ionis Pharma should help Biogen take back some market share from competitors in the SMA space.
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