Why Biogen's Fortunes Hinge On Aducanumab Approval

Biogen Inc BIIB reported fairly solid third-quarter results Wednesday, sending its shares higher. 

Against this backdrop, an analyst at SVB Leerink said the key to outperformance for the company is a positive regulatory ruling on its controversial Alzheimer's treatment candidate aducanumab.

The Biogen Analyst: Marc Goodman maintained an Outperform rating on Biogen with a $342 price target. 

The Biogen Takeaways: Notwithstanding the better-than-expected headline numbers, a faster-than-expected decline in sales of spinal muscular dystrophy drug Spinraza and overly optimistic consensus estimate for the multiple sclerosis drug Tecfidera are cause of concern, Goodman said in a note.

Vumerity, also used to treat multiple sclerosis, is unlikely to break above the $500-million mark in sales given physician feedback and the generic Tecfidera competition, the analyst said. 

Biogen's pipeline, though growing is filled with more high risk-reward, early stage assets, making it difficult for investors to realize the value until true proof-of-concept studies are revealed, he said. 

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As far as Biogen is concerned, it is all about aducanumab and the upcoming Nov. 6 Adcom meeting, Goodman said. 

"And our positive view on that outcome considerably outweighs these concerns mentioned above, all of which are fairly understood by the investment community and reflected with such a low P/E multiple for the stock." 

If aducanumab gets to the market, investor perception of Biogen's pipeline will become more positive, as the drug candidate creates a nice "halo effect" around the company's high-risk, high-reward R&D strategy, the analyst said. 

Takeaways On Aducanumab From Earnings Call: The FDA could give its verdict on aducanumab earlier than the March 7 PDUFA date, as the Adcom meeting was also scheduled early, Goodman said, citing Biogen management. 

Among regulatory submissions outside of the U.S., Biogen said it has submitted a marketing authorization approval to the European Medicines Agency and is working on preparing for a regulatory submission in Japan, the analyst said. 

The company is making commercial preparations in the U.S. in anticipation of a positive verdict, while also working on launch readiness activities in Europe and Japan, he said. 

Following the third-quarter results, SVB Leerink increased its 2020 EPS estimate for Biogen from $32.45 to $33.35. 

BIIB Price Action: Biogen shares were down 1.93% at $263.73 at last check Thursday. 

Related Link: Price Over Earnings Overview: Biogen