Here's Why Biogen Shares Are Crashing Today

Biogen Inc BIIB shares are crashing on Friday morning, down 4 percent following new commentary from Cowen.

According to a note from analyst Eric Schmidt, Biogen will present Aducanumab 12-month data at the Alzheimer's Association International Conference later this month, on July 22 at 2pm. Aducanumab is a human monoclonal antibody and drug candidate, also known as BIIB0307, used for the treatment of Alzheimer's disease.

The company reported Phase Ib results in March, prompting Wall Street to become very excited. "This is the first time an investigational drug for Alzheimer's disease has demonstrated a statistically significant reduction on amyloid plaque as well as a statistically significant slowing of clinical impairment in patients with prodromal or mild disease," Biogen's Alfred Sandrock, M.D., Ph.D. said at the time.

After the data release, J.P. Morgan's Cory Kasimov and Schmidt reiterated the equivalent of Buy ratings on the stock. Morgan Stanley, Piper Jaffray and Leerink are a handful of other firms who hold Buy outlooks on Biogen. Tipranks reports the average analyst price target on shares is $481.17, indicating upside near 25 percent.

Cowen's Latest Commentary

Schmidt's latest research indicates he's still bullish on Biogen with a $494 price target, but the stock could, theoretically, trade up or down $50 after its AAIC results presentation. "While we are biased somewhat to the positive side, we lack conviction in this binary event," he warned.

March's Phase Ib results were "impressive" in Schmidt's eyes, but the 6mg cohort "had not yet differentiated itself from placebo" and that segment of the trial was just 22 to 23 patients, opening the results to "some bias." Upcoming data could address these issues, but any further problems related to placebo differentiation could cause investors to question Aducanumab's "most compelling efficacy signal."

Multiple Outcomes Possible

At the moment, Schmidt says the markets are expecting a 40 percent to 50 percent chance of success for the drug in Phase III, a number that could rise to 60 to 70 percent in a best-case scenario. In a worst-case scenario, this figure could fall to 20 percent.

"Aside from reading management's body language, we think it nearly impossible to call how the 6mg cohort might have performed at 52 weeks...we lack the conviction to recommend investors play this potential binary event," the analyst wrote.

Reasons To Be Optimistic, Cautious

Schmidt concluded his analysis with two reasons to be optimistic:

• "BIIB has carefully analyzed prior datasets."
• "BIIB is moving full steam ahead."

However, he also shared a few reasons to be cautious:

• "Recent management commentary has been lacking."
• "For BIIB, investing in aducanumab makes sense even if the probability of success is low."
• "Placebo group performance could end up looking better than before."

Why Is The Stock Falling?

Twelve days ahead of the key data release, Biogen is trading near the $385 range. One reason the stock could be falling is simple: Schmidt's recommendation not to play the event -- long or short -- could effectively push speculators out of the stock.