Shares of biotech company Biogen (NASDAQ:BIIB) got a significant boost last year after the U.S. FDA granted accelerated approval to its Alzheimer’s disease drug Aduhelm.
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Things haven’t turned out the way Biogen would have wanted since then.
Recently, CMS (Centers for Medicare & Medicaid Services), in a final national coverage determination (NCD), restricted Aduhelm’s coverage, thus limiting the revenue opportunity for Biogen.
In response to the CMS decision, Biogen’s outgoing CEO, Michel Vounatsos, stated, “This decision effectively denies all Medicare beneficiaries access to ADUHELM.”
As a result, Biogen has decided to eliminate its “commercial infrastructure for ADUHELM,” Vounatsos added.
Now What?
Analysts believe that CMS’ decision wipes out hopes that Aduhelm will rake in a substantial amount of revenue for the company.
Needham analyst Ami Fadia stated that CMS “limited Aduhelm coverage to clinical trials,” thereby significantly limiting its potential.
To reflect the lower commercial potential for Aduhelm, Fadia reduced the “$12 of value per share for Aduhelm” in her sum-of-the-parts valuation to $0.50.
Meanwhile, Robert W. Baird analyst Brian Skorne views that Aduhelm is “effectively dead” following the CMS’ decision to restrict its coverage.
Besides Aduhelm’s setback, Biogen faces short-term headwinds, including competitive headwinds for Spinraza (used for treating spinal muscular atrophy), declining profit share in the U.S. for Rituxan (used for treating chronic lymphocytic leukemia), and generic versions eroding the market share of Tecfidera (multiple sclerosis drug).
Nevertheless, management remains upbeat about potential new product launches to help the company grow in the future.
Wall Street’s Take
On TipRanks, Biogen stock has received 12 Buys and 11 Holds for a Moderate Buy consensus rating. BIIB stock has a neutral Smart Score of 4 out of 10. The average Biogen price target of $242.05 implies 17.5% upside potential to current levels.
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