With a spinoff of its hemophilia business looming, its current CEO on his way out and it being recently deemed an acquirer as well as buyout candidate, the only thing certain about Biogen Inc (NASDAQ:BIIB) is that the future is entirely uncertain.
This uncertainty alone is enough to steer some investors clear of Biogen stock, and understandably so — rivals in the biotech and biopharma space are less of coin toss.
Yet investors that are willing to take a step back and take a good look at the bigger picture may find BIIB is a better bet than the its recent weakness would suggest.
Biogen Stock in Flux
The precise moment the shakeup of Biogen began is largely a matter of perspective.
Some would argue it was in May of this year, when the company announced it would shed its hemophilia business — Eloctate and Alprolix — so it could focus on everything else. Namely, everything else was the company’s multiple sclerosis portfolio and its risky Alzheimer’s therapy efforts. And that argument isn’t a bad one.
More plausibly though, the cracks started to appear in April of last year; that’s when sales of its ballyhooed MS therapy Tecfidera started to slow, and doubts about its Alzheimer’s research and development started to surface.
The proof of that doubt? Between April of last year and this past July’s low, BIIB gave up more than 40% of its value.
Biogen stock has since bounced back 37% from its lows, on the heels of news that it would be unlocking value by spinning off one of its more proven divisions. However, that wasn’t likely the original long-term plan … it was a last resort.
Ditto for CEO George Scangos, who announced this July he would be stepping down when a predecessor was found and brought up to speed.
While Scangos was well liked, well respected and did a lot of good for Biogen, even his biggest fans don’t disagree that change could be a good thing for the company going forward.
On the flipside, the impending changes raise more questions than they answer.
Healthy Pipeline for Biogen
Perhaps first and foremost would-be investors wonder what the company’s portfolio and pipeline will look like now that Tecfidera’s growth is slowing down and Eloctate and Alprolix will be shed as part of the spinoff. The answer to the question is, more than most investors realize. The company is going to continue with its multiple sclerosis, spinal muscular atrophy, Alzheimer’s disease, Parkinson’s disease, amyotrophic lateral sclerosis and neuropathic pain drugs.
The big unknown — for better or worse — in the mix is the company’s Alzheimer’s drug aducanumab.
Alzheimer’s has been a tough one for the industry. Little has worked well to treat the disease. Aducanumab has the potential to change that, however. The therapy was recently fast-tracked by the European Medicines Agency, and it’s a big part of the reason Merck & Co., Inc. (NYSE:MRK) was an interested suitor. Merck wouldn’t take such an interest if aducanumab wasn’t a good bet. At the same time, Biogen is ready to take its beta-secretase cleaving enzyme inhibitor E2609 into Phase 3 trials with its development partner Eisai.
At stake is an underserved Alzheimer’s market that will be worth more than $13 billion by 2023, if the right drug can be brought to the market.
That’s a big if, however. Biogen’s failure with MS treatment Tysabri makes it clear not everything the company touches turns to gold.
For proof that nobody really knows what the future holds for Biogen’s on-the-fence pipeline and erratic drug portfolio, some analysts think the company could drive $18.3 billion in sales in 2021, while others think the number could be as low as $12.8 billion. That’s leaves investors filling in some very big blanks.
Perhaps the even bigger unknown is which direction the company will take under a new CEO. As RBC Capital Markets analyst Michal Yee put it, ” [BIIB] stock would trade based on what ‘type’ of CEO they eventually bring in and whether the person is more science (oriented) or more operational and (has a) history of M&A.”
If the direction and odds of the pipeline were already crystal clear, and if the idea an acquisition hadn’t already been floated, the income CEO’s path would be fairly well laid out. Whomever Biogen hires to replace Scangos, though, has an uncomfortable number of directions he or she could go.
Bottom Line for BIIB
For the record, while Biogen seems able to create more than its fair share of drama, bear in mind the company is now into its tenth consecutive year of rising revenue, rising profits and widening margins. That’s more than plenty of other companies can boast.
Still, Biogen is headed into far more obscured turbulence than most other companies will be dealing with in the near future. The potential is awesome, but so is the risk. BIIB may not be worth that risk when other, clearer opportunities are available.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
