Biogen Hits All Time Low After CMS Draft Limits Usage of Aduhelm

Shares of biopharmaceutical company Biogen, Inc. (NASDAQ: BIIB) plunged as much as 10.1%, after the Centers for Medicare & Medicaid Services (CMS) proposed limited usage of BIIB’s Alzheimer’s drugs including ADUHELM.

Biogen’s anti-amyloid drug ADUHELM is an indicated treatment for Alzheimer’s disease. In June 2021, the U.S. Food and Drug Administration (FDA) approved ADUHELM. It is the first drug to receive FDA-approved treatment for Alzheimer’s disease since 2003.

Biogen has lost 15.5% over the past year, and its shares dropped 6.7% closing at $225.34 on January 12.

Limited Usage Under CMS

According to the CMS draft proposal, the Alzheimer’s drug treatment would only cover individuals who are enrolled in the approved clinical trials. This limits the number of patients to a few thousand out of the nearly one million patients who could have been eligible for ADUHELM.

CMS is also concerned about the several side effects associated with these drug treatments.

Another reason for the low acceptance of ADUHELM is its high price. The drug costs about $56,000 a year, which imposes a huge burden on the Medicare program, since most of the Alzheimer’s patients are above 65 years of age and fall under the program. Following a backlash for its high price, Biogen slashed the wholesale prices for the drug by nearly 50% effective January 1, 2022.

CMS’s decision further hurts the drugmaker’s sales, which are quite meager. In Q3, the ADUHELM drug generated only $0.3 million in sales, while analysts had estimated $10.8 million in sales from the drug.

Biogen Comments on the Draft Proposal

Following the CMS announcement, Biogen issued a statement urging the CMS to approve the drug’s usage consistent with criteria used in the clinical trials, thereby increasing the coverage of the patients.

Biogen will make a formal response to the CMS during the 30-day open comment period. The final decision is expected in April 2022.

The company said, “It is imperative to change this draft decision to be aligned with reimbursement for other therapies for progressive diseases, where patients have immediate and equal access to medicines approved by the FDA.”

Analysts’ Take

Following the CMS announcement, several Top Analysts revised their models to reflect the limited sales from ADUHELM.

Needham Analyst Ami Fadia lowered the price target on the stock to $292 (29.6% upside potential) from $328, while maintaining a Buy rating.

Responding to the news, Fadia said, “While we acknowledge that the final decision could look very different from the draft decision, as we saw with CAR-T therapies in 2019, we believe it is prudent to reflect the risk in our model at this stage.”

Fadia added, “We are lowering the Point of Sale (PoS) for Aduhelm in our model from 75% to 20% to reflect today’s news. This lowers Aduhelm’s price per share in our model from ~$48 to ~$13 and lowers our PT from $328 to $292.”

Overall, the stock has a Moderate Buy consensus rating based on 15 Buys and 12 Holds. The average Biogen price target of $307.12 implies 36.3% upside potential to current levels.

Stock Investors

According to TipRanks’ Stock Investors tool, retail investors currently have a Very Negative stance on Biogen, with 3.6% of portfolios tracked by TipRanks decreasing their exposure to BIIB stock over the last 7 days.

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