Biogen (NASDAQ:BIIB) looked like it was finally ready to run. After a dismal run over the last few months — with shares shedding over 26% from the April high to June low — Biogen stock finally looked to be back in the bulls’ control.
The stock opened higher and tacked on almost 10% on July 8. However, shares closed higher by “just” 4.4%, as investors could not keep the name elevated.
While the slip from the session high isn’t exactly a death sentence for this name, the poor reaction from it certainly is discouraging.
No Belief in Biogen’s Alzheimer’s Treatment?
I have read about Biogen’s Alzheimer’s treatment for years now. So have other investors, which is why they may have been so excited to bid the stock higher near the open. That came on news that Biogen had submitted its U.S. marketing application, seeking approval from the FDA for its treatment.
However, is the stock’s fade from the highs a sign that investors don’t believe in the treatment — or at least, believe that it will not be approved? That’s sort of what it looks like, particularly as it failed to hold so many key technical points, (more on that in a minute).
The unfortunate truth is that Alzheimer’s is a very difficult disease to treat. Further, the company’s treatment, aducanumab, has had mixed results so far with its late-stage studies.
As a quick reminder, the company canned two Phase 3 trials in March 2019, when it appeared unlikely that the studies would meet their primary endpoints. Another study in December revealed that a high-dose treatment met the primary endpoint, but then another Phase 3 study failed to meet its primary and secondary endpoints for both high- and low-dose treatments.
To be clear, filing with the FDA is good news. However, it’s also clear why investors are hesitant to gobble up Biogen stock on the news, given how bumpy the results have been with aducanumab.
Trading Biogen Stock
Click to Enlarge
I don’t have anything against Biogen — I’m simply looking at the reaction to the stock price on what is supposed to be good news. Further, the fading price action came on a day where overall markets powered higher.
BIIB stock opened north of $294, but quickly moved lower. The stock failed to hold the $290 area, which was notable support in April and May before giving way in June. It also failed to hold the 50-day and 200-day moving averages.
Yikes. That is not the kind of price action you want to see if you’re a bull in this name. On the downside, let’s see if $270 and the 20-day moving average hold as support. Below puts the $260 level in play, as well as the June low (and the 2020 low) at $257.60.
On the upside, look for a move back over $290 and those key moving averages. Above puts $310-plus in play for BIIB stock.
Better Options Than Biogen
The technicals are one thing, but the fundamentals are another. Put simply, there is just no growth here.
Biogen has had decent growth in years past, and even solid cash flow expansion. But moving forward isn’t so rosy. Analysts predict a 3% drop in sales this year and a 4.1% decline in 2021. On the earnings front, estimates are in similar shape. They call for a 1.7% drop and a 4.8% drop this year and next, respectively.
With no catalyst on the charts and with negative growth in revenue and earnings, where is the motivation to buy this stock? I just don’t see it.
Instead I prefer smaller biotech companies with more upside potential and stronger growth. As for larger market cap biotech stocks, I prefer Gilead Sciences (NASDAQ:GILD) and Regeneron (NASDAQ:REGN).
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.
