Baird: Biogen A Buy On M&A Prospects, Underappreciated Franchises

The Street’s becoming increasingly — albeit reluctantly — bullish on Biogen Inc BIIB.

“While we have all the enthusiasm that goes with catching a falling knife here, we believe BIIB shares are too ‘cheap’ to sit on the sidelines,” Baird Equity Research analyst Brian Skorney said in a Wednesday note.

The Rating

Skorney upgraded Biogen from Neutral to Outperform and maintained a $323 price target.

The Thesis

The analyst considers Biogen better suited than Amgen, Inc. AMGN, Celgene Corporation CELG and Gilead Sciences, Inc. GILD to provide upside optionality at its present valuation. (See Skorney's track record here.) 

For one, its multiple sclerosis franchise appears stable against Street forecasts, despite enduring susceptibility to pricing and market share pressures, the analyst said. 

At the same time, Skorney considers Spinraza underappreciated and “a meaningful growth engine" for Biogen. 

“We believe the threat of gene therapy has kept its contribution to the valuation suppressed, but believe this should not be the case and could even argue gene therapy could increase Spinraza's long-term sales, as the two should be used in combination and could result in significantly increasing prevalence by extending survival." 

Biogen is well-positioned for acquisition as either a buyer or a seller, Skorney said. Its relatively small potential revenue deficits would allow for a low-synergy purchase, while its MS and neuro assets could attract bidders, he said. 

Price Action

Biogen shares were trading up more than 2 percent at the time of publication Wednesday at $267.83. 

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