BIIB Stock: Is It Time to Bail on Biogen Inc?

BIIB StockDon’t Give Up on BIIB Stock

Biogen Inc (NASDAQ:BIIB) stock suffered a major blow on June 7.

There is no doubt of that, as Biogen stock dropped some 10% in a single trading session and almost 40% from its peaks. Biogen stock had already lost 5.39% of its value ahead of yesterday’s tumble. The overall picture for the famous biotech company looks more like a Picasso than a Monet.

But as the common saying goes (particularly for someone investing in biotechs or a heavily research-based business), you win some and you lose some. Not all efforts are rewarded and not all successful clinical trials convert into blockbusters.

That being said, Biogen is successful more often than it is unsuccessful. Biogen stock could see a strong revival, bouncing back in a bullish phase quickly. Long-term owners who understand the intricacies of biotechs may see BIIB stock’s current price as a signal to buy. The stock has seen a nice rally, gaining about 1.18%, on the very day after its big tumble.

Still, at the time of this writing, Biogen is trading around 17% lower year-to-date. This makes Biogen an interesting opportunity, which nobody should dismiss without some analysis.

It’s true that the data from studies related to its new treatment for multiple sclerosis (MS), “Opicinumab,” were disappointing, but the drug was always going to have risks. The chances of Opicinumab’s success were not especially optimistic. There was clearly too much hype surrounding the new drug’s chances of success in repairing MS sufferers’ nervous systems.

In fact, a mid-stage study had already shown that Opicinumab did not achieve three key improvement goals: walking, cognition, and slowing disability progression. (Source: “Biogen stock hammered on dismal drug results,” Boston Globe, June 8, 2016.) Yet, in some trials, the drug proved to be effective against acute optic neuritis. (Source: “Biogen multiple sclerosis drug flunks clinical trial,” PMLive, June 8, 2016.)

The reason Biogen’s shares dropped so sharply is because while the company has not abandoned the Opicinumab program just yet, investors—especially long-term ones—lost faith in the company’s MS product line. Biogen has not sold as many “Avonex” and “Plegridy” products as was expected. Moreover, in 2015, Biogen cut its workforce and research funding in an effort to save some $250 million. (Source: Ibid.)

Still, the government recently approved Biogen’s new, once-monthly MS drug, “Zinbryta,” which, despite stronger side effects than its predecessor Avonex, has also proved to be safer than Sanofi’s competing treatment. (Source: “Biogen’s MS drug Zinbryta tied to more serious side effects than Avonex: Advera,” Fierce Pharma, May 31, 2016.)

So, was the June 7 tumble a sign of the times for Biogen or just a day to forget and move on?

No doubt the Biogen clinical trial tests brought down the NASDAQ as the news has weighed on the entire U.S. pharmaceuticals business, which was the hardest hit of the session (down two percent in the biotech area). The sector got no help from Valeant Pharmaceuticals Intl Inc (NYSE:VRX), either, which reduced its guidance.

If you’re interested in MS drugs and research, then you might consider France’s GeNeuro SA, which gains from Biogen’s failure. GeNeuro has not yet proven its efficacy, but the elimination of a competitor is not a bad thing, at least for now. GeNeuro stock gained 3.1% and hit €10.22 per share by noon.

Yet, it is in Europe itself that Biogen had three drugs approved by European and U.S. authorities in the past few days. After the U.S. Food and Drug Administration approved the abovementioned Zinbryta (daclizumab), the European Commission granted Biogen the right to market “Flixabi,” an arthritis treatment developed by Samsung Bioepis (a joint venture between Samsung and Biogen BioLogics). And earlier in 2016, the same Biogen-Samsung joint venture received approval for “Benepali,” which is already on sale in much of the EU as a new entrant in the estimated $10.0 billion/year anti-TNF (tumor necrosis factor) therapies area, among the EU’s largest drug expenditures.

Anti-TNFs are used worldwide to treat inflammatory conditions such as rheumatoid arthritis (RA), psoriatic arthritis, juvenile arthritis, inflammatory bowel disease (Crohn’s and ulcerative colitis), ankylosing spondylitis, and psoriasis. (Source: “Anti-TNF Drugs,” American College of Rheumatology, last accessed June 8, 2016.) Benepali and Flixabi will offer physicians alternatives that will drive meaningful savings, promoting demand across the EU.

Finally, it must be noted that the big tumble has come on the heels of an equally big hike. A week ago, Biogen enjoyed excellent performance.

The short-term view on Biogen points to a strengthening of today’s bullish trend, which could propel the stock back to the $290.00 mark, where it was trading until last week. Biogen’s fall reflected a market overreaction and perhaps, given its known performance risks, investors should not have considered it such an important factor in the company’s overall performance. Biogen has other successful products and new developments underway. Geoffrey Porges, not a Biogen fan, didn’t even include Opicinumab in his estimates.

So, in short, Biogen, remains one of the best biotech stocks to watch—and it’s now available at a great price.