Stifel Buys Back Into Biogen, Sees Upside In Alzheimer's Candidate

The Street leans bullish on Biogen Inc BIIB, and one sidelined analyst doesn’t want to miss on the profits.

The Rating

Stifel Nicolaus analyst Paul Matteis resumed coverage of Biogen with a Buy rating and $394 price target.

The Thesis

Biogen’s fate is seen to hinge on its Alzheimer’s therapy, with the odds of success being better than 50-50, Matteis said in a note.  

“From a sentiment perspective, we think the stock — in a positive or negative Alzheimer's scenario — could overshoot its fundamental value,” the analyst said. 

Stifel read Phase 1b aducanumab data with more forgiveness than investors did given the treatment’s differentiated profile.

“The hardest thing to get comfort with is that the effect size — even if Aducanumab does work — is small, so, even if the drug does work, there are still exogenous variables that place the trial at risk." 

At the same time, Biogen’s multiple sclerosis candidates are expected to perform in line with or better than consensus forecasts for the next two years, although branded competition, payor pushback and generics could impede growth after that, Matteis said. 

Stifel also anticipates growth in Spinraza among Type 2 and Type 3 spinal muscular atrophy patients, particularly considering the opportunity for quicker than expected international sales. Stifel said ex-U.S. sales could soon exceed U.S. sales by hundreds of millions of dollars. The spread would help buffer the drug against inevitable competition.

“Global diversification may also help with durability when gene therapy disrupts the category,” the analyst said. “When this happens we assume that Spinraza's front-line Type 1 share will quickly approach zero percent, but we believe its ability to retain patients already on therapy who are doing well could be stronger than many expect.”

Price Action

Biogen shares were trading up 2.94 percent at $351.20 at the time of publication Tuesday. 

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